Oil dips on rising US supply, potential Venezuela production investment2 min read . Updated: 29 Aug 2018, 01:19 PM IST
In the US, crude inventories rose by 38,000 barrels to 405.7 million barrels in the week to 24 August
Singapore: Oil prices fell on Wednesday, pulled down by a reported rise in US crude inventories and hopes that a plunge in Venezuela’s output could be halted. International Brent crude oil futures were at $75.69 per barrel at 0654 GMT, down 26 cents, or 0.3%, from their last close.
US West Texas Intermediate (WTI) crude futures were down 12 cents, or 0.2%, at $68.41 a barrel.
In the US, crude inventories rose by 38,000 barrels to 405.7 million barrels in the week to 24 August, industry group the American Petroleum Institute said on Tuesday.
“The API reported surprisingly flat numbers to a market expecting a reasonable draw in crude and a build in products," said Sukrit Vijayakar, director of oil consultancy Trifecta.
Official US fuel inventory and crude production data will be published on Wednesday by the Energy Information Administration (EIA).
Traders said that reports of potential investment into Venezuela’s struggling oil production also impacted markets. Crude exports from the crisis-struck OPEC-member have dropped by half since 2016 to below 1 million barrels per day (bpd).
To stem tumbling output, Venezuelan state-run oil firm PDVSA said on Tuesday it had signed a $430 million investment agreement to increase production by 640,000 bpd at 14 oil fields, although given the country’s political and economic instability, many analysts doubted whether this investment would go through.
Despite the risk of disruption especially from OPEC-countries like Venezuela, Iran, Libya and Nigeria, Bank of America Merrill Lynch said global supply could climb towards year-end. “Heading into 4Q18, we expect rising non-OPEC oil production as supply outages abate and greenfield projects ramp up," the US bank said in a note.
“Currently, non-OPEC supply outages are at a 15-month high of 730,000 bpd. However, nearly half of these volumes are in the process of being restored," it said.
Adding to that will be new production in Canada, Brazil and from the United States, which the bank said “should provide a substantial boost to non-OPEC supplies" during the second-half of the year “taming upside pressures on Brent crude oil prices".
Bank of America said it expected Brent prices to be in a $65 to $80 per barrel range “until Iran sanctions start to bite" in the first-half of 2019.
Despite prospects of rising supplies, traders said crude markets remained relatively tight, largely because of the prospect of US sanctions against Iran, which will start to target its oil industry from November. Bowing to pressure from Washington, many crude buyers have already reduced orders from OPEC’s third-biggest producer.
Although Tehran is offering steep discounts, Iran’s August crude oil and condensate loadings are estimated at 2.06 million barrels per day (bpd), versus a peak of 3.09 million bpd in April, trade flows data on Thomson Reuters Eikon showed.