Futures slipped 0.6% in after-market trading in New York. The American Petroleum Institute’s weekly report was said to show a 3.55 million barrel increase in US stockpiles last week, compared with a 2 million decline predicted by analysts in a Bloomberg survey. API also reported a 10 million barrel surge in gasoline and distillate fuels.
The results, if confirmed by official government figures Wednesday, are “crazy bearish” and indicate OPEC needs to do more to cut supplies, said Phil Flynn, senior markets analyst at Price Futures Group, in a note to clients.
Oil had risen earlier in the day on optimism that the cartel and its partners would move to stabilise prices. Vitol Group, the world’s largest oil trader, expects the coalition to extend output curbs in the second half of 2019, while Saudi Energy Minister Khalid Al-Falih said he’s committed to doing whatever it takes to balance markets.
West Texas Intermediate crude prices have fallen almost 20% – about US$13 a barrel – from a peak in late April, moving to the brink of a bear market. The drop occurred as trade relations between Washington and Beijing soured and the White House announced tariffs on Mexican goods.
WTI for July delivery fell 30 cents to US$52.95 at 5.15 p.m. on the New York Mercantile Exchange. A settlement at that price on Wednesday would mean the contract has lost more than 20%, putting it in a technical bear market.
Brent for August settlement was up 13 cents to US$61.41 a barrel on London’s ICE Futures Europe exchange. The global benchmark crude was trading at a premium of US$8.38 to WTI for the same month.
The market could be supported to the upside in the near term with the Organization of Petroleum Exporting Countries expected to meet in the coming weeks. That will come as summer driving season kicks into high gear, helping clear US inventories, a crucial marker for investors looking for rebalancing markets.
UBS analysts said that crude is forecast to rise towards US$75 over the next three months due to the market being undersupplied while Societe Generale pinned its Brent oil price forecast to average US$72.50 a barrel in the second half of the year.
“It’s pretty clear that demand concerns still have the market at its grip,” said Gene McGillian, manager of market research at Tradition Energy. “But, maybe some of these demand fears may have extended itself. Refinery utilisation jumped back above 90% and WTI should pick up again.”
Saudi Arabia’s Al-Falih said he’s confident the OPEC coalition “will do what is needed to sustain market stability beyond June.” Recent oil price volatility is “unwarranted,” he said in an interview with the state-run Saudi Press Agency.
The kingdom boosted production last month by the most this year as output from fellow OPEC member Iran plunged to the lowest since 1990 due to US sanctions, according to a Bloomberg survey of officials, analysts and ship-tracking data. The figures indicate that Saudi Arabia has been willing to replace the lost Iranian barrels, setting the stage for a contentious meeting when the cartel and its partners gather in the coming weeks.