Singapore: Oil prices dipped on Thursday, weighed down by swelling US crude inventories and record weekly US production that undermined efforts by the Organization of the Petroleum Exporting Countries (Opec) to cut supplies, although potential new US sanctions against Iran kept markets on the edge.
Brent crude oil futures were at $73.31 per barrel at 12.24pm, down 5 cents from their last close. US West Texas Intermediate (WTI) crude futures were down just 1 cent at $67.92 per barrel.
Prices were pulled down by a report from the US Energy Information Administration (EIA) on Wednesday showing US crude inventories jumped by 6.2 million barrels to 435.96 million barrels in the week to April 27, the highest level in 2018.
“The (EIA) report showed a much larger than expected crude build for last week as well as an unexpected build in gasoline inventories," said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
US oil production also rose to a record of 10.62 million barrels per day (bpd), a jump of more than a quarter since mid-2016. US now produces more crude than top exporter and Saudi Arabia, the biggest producer in Opec. Only Russia pumps more, at around 11 million bpd.
US could surpass that level soon too, as oil firms have ramped up January to May production faster than at any other time in at least half a decade, Thomson Reuters Eikon data shows.
US drilling for new production is increasing, encouraged by rising prices following Opec’s production curbs.
State-owned producer Saudi Aramco said on Wednesday it has raised the June price for its Arab Light grade for Asian customers by 70 cents a barrel versus May to a premium of $1.90 a barrel to the Oman/Dubai average, the highest since August 2014.
Overall, Opec produced around 32 million bpd of crude in April, according to a Reuters survey, implying that its production is slightly below its target of 32.5 million bpd, due largely to plunging output in Venezuela.
BMI Research said it expects Opec’s output to remain stable around or slightly above 32 million bpd for the rest of the year.
Looming over markets, however, is the May 12 deadline by when US President Donald Trump is due to decide whether or not to continue waiving US sanctions against Iran.
Trump has all but decided to withdraw from the 2015 Iran nuclear accord by May 12 but exactly how he will do so remains unclear, two White House officials and a source familiar with the administration’s internal debate said on Wednesday.
Opec-member Iran re-emerged as a major oil exporter in January 2016 when international sanctions against Tehran were suspended in return for curbs on Iran’s nuclear programme. Reuters