Oil prices dip on US inventory build-up

Oil prices fell on Wednesday, further shedding gains following OPEC’s output deal last November, as industry data showed an increase in US crude stocks.

Global benchmark Brent crude remained above the $50-mark, and was last trading 0.5 percent lower at $50.7 per barrel (bbl). West Texas Intermediate (WTI) fell 1.8 percent to $47.34/bbl.

US crude inventories climbed by 4.5 million barrels to 533.6 million in the week to March 17, according to data from the American Petroleum Institute (API). Gasoline stocks, meanwhile, declined by 4.9 million barrels.

“Oil prices were vulnerable to downside shocks on Tuesday with WTI crude descending towards $48 as the growing concerns over the excessive oversupply in the global markets weighed heavily on sentiment,” said Lukman Otunuga, research analyst at FXTM.

WTI could fall further as higher US output and inventories offset OPEC’s efforts to stabilize oil markets, he told Argaam. “Much attention may be directed towards the pending EIA data this evening which could expose oil prices to further losses if crude stocks build.”

OPEC and non-member oil producers, led by Saudi Arabia and Russia, agreed last December to cut by a combined 1.8 million barrels per day (mbd), as part of efforts to ease the supply glut and boost prices. Under the six-month deal, OPEC agreed to restrict production to 32.5 mbd.

The cartel’s output cuts have exceeded the target thus far, with production declining to 31.96 mbd in February, according to OPEC’s latest monthly report.

Saudi Arabia led the group’s cuts for the second month in a row, with the kingdom’s crude production falling to 9.8 million mbd in February, from nearly 9.9 mbd the previous month.

“Although most remain somewhat optimistic over OPEC extending its six-month contract, the resurgence of US shale, coupled with concerns of some members not fully respecting the compliance in cutting production, could obstruct the deal,” Otunuga added.

Write to Jerusha Sequeira at jerusha.s@argaamnews.com