NEW YORK: Oil fell to its lowest in a month as ballooning US crude stockpiles and higher-than-expected Russian production offset worries about a supply squeeze.
West Texas Intermediate (WTI) futures fell as much as 3.1% on Thursday, a day after the US government data showed American crude inventories soared to the highest level in two years, with production hitting a record. Russia, meanwhile, missed a target for production cuts in April, dampening the impact of its agreement with OPEC to prop up prices.
In Belarus, the arrival of clean Russian crude also showed last week’s contamination issues are heading toward a resolution.
“The US inventories have come in quite high and there was already evidence and anticipation that they will be supplying more oil,' said Frances Hudson, a global thematic strategist at Aberdeen Standard Investments in Edinburgh. “I don’t think we’re particularly bullish on prices from here,' he added.
Oil reached a five-month high last week as the Trump administration moved to tighten sanctions on Iran, ending a series of waivers that exempted China and other major economies. Prices have since slipped amid signs that, despite the Iranian crisis and threats brewing in other countries, global markets remain sufficiently supplied.
“The overall crude balances have been sloppy of late," said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London.
WTI crude for June delivery sank as low as $61.65 a barrel on the New York Mercantile Exchange, its lowest level since April 1. It traded at $61.78 as of 10:19 am local time.
Brent for July settlement fell 2.1% to $70.68 a barrel on the London-based ICE Futures Europe Exchange. The global benchmark crude was at a premium of $8.77 to WTI for the same month.
In Venezuela, home to the world’s largest reserves, the immediate risk to output has receded, as an attempted uprising against President Nicolas Maduro appears to have stalled.
Still, Venezuelan production may yet fall near zero by the end of the year as the US intensifies measures against Maduro’s regime, RBC Capital Markets predicts. It’s “quite conceivable" that Maduro will manage to hang on with help from Moscow, or that another pro-military candidate will assume power in the near term, preventing a recovery in the oil industry, the bank said in a note.
American crude stockpiles jumped by almost 10 million barrels to 471 million last week, the highest since 2017, the Energy Information Administration said on Wednesday. Analysts surveyed by Bloomberg had forecast an increase of just 1.75 million barrels. Production rose to 12.3 million barrels a day.
“When the US crude-oil warehouses bulge to their highest levels since September 2017, while production continues to set new high-water marks, warning signals should be flashing red," said Stephen Innes, head of trading at SPI Asset Management.
This story has been published from a wire agency feed without modifications to the text.