Oil stocks rise, surprising analysts and causing price to slip

London — Oil slipped below $74 a barrel on Wednesday pressured by an industry report that US stockpiles of crude rose unexpectedly and by higher Opec production, adding to indications of more ample supply.

On Tuesday, the American Petroleum Institute (API) said crude inventories rose by 5.6-million barrels last week. Analysts had expected a decrease of 2.8-million. The US government’s supply report is due on Wednesday.

Brent crude, the global benchmark, dropped 40 US cents to $73.81 a barrel by 8.32am GMT, adding to a 1.8% loss in the previous session. US crude was down 44c at $68.32.

“A fresh dose of price angst has come from an unexpected source,” said Stephen Brennock of oil broker PVM. “The US has been flying the flag for the drawdown in global oil stockpiles, yet the rebalancing paused abruptly last week,” he said, referring to the API report.

In July, Brent fell more than 6% and US crude slumped about 7%, the biggest monthly declines for both benchmarks since July 2016. Oil also slipped on more ample supplies.

In June, Opec plus Russia and other allies decided to ease supply cuts that had been in place since 2017 after a glut was cleared.

Opec production rose in June, led by Saudi Arabia, and reached a 2018 high in July, a Reuters survey found on Monday, although declines from Iran and other producers limited the increase.

Kuwait confirmed on Wednesday it had also increased production in July. Output is currently 2.8-million barrels per day, its oil minister said on Wednesday, an increase of 100,000 barrels per day from June’s average.

“Strong upticks from key Opec members in July helped push group production up significantly versus June,” analysts at JBC Energy said in a report.

Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved weighed on prices.

Yemen’s Houthi group said it was ready to halt attacks in the Red Sea to support peace efforts. Saudi Arabia had suspended oil shipments through the strait last week after attacks on tankers.

Concern over slowing economic growth because of a trade dispute between the US and China are also putting downward pressure on the market.

Reuters