U.S. crude supplies are again haunting oil prices, chilling optimism over a possible extension of OPEC-led production cuts that helped drive a rally over the past week.
Futures lost as much as 0.7 percent in New York on Thursday. U.S. output rose for a seventh week and inventories expanded to a fresh record, government data showed on Wednesday, after which prices pared a 1.7 percent gain in intraday trading to close little changed. Still, if OPEC continues to reduce supply past June, crude may advance to $55 a barrel, Pioneer Natural Resources Co. Chairman Scott Sheffield said in a Bloomberg TV interview.
The increase in U.S. inventories is reviving concerns that American supplies will counter output curbs led by the Organization of Petroleum Exporting Countries aimed at easing a global glut. Oil rallied back above $50 a barrel last week after some nations supported an extension to the six-month deal to cut production. OPEC Secretary-General Mohammad Barkindo said Sunday that he’s “cautiously optimistic that the market is already rebalancing.”
“U.S. output is a headwind as it continues to rise and that’s stopping the price from extending gains,” said David Lennox, a resource analyst at Fat Prophets in Sydney. Still, “the OPEC cuts are preventing oil from sinking to $45.”
West Texas Intermediate for May delivery dropped as much as 38 cents to $50.77 a barrel on the New York Mercantile Exchange, and was at $50.86 by 2:07 p.m. in Hong Kong. Total volume traded was about 48 percent below the 100-day average. The contract gained 12 cents to $51.15 on Wednesday.
Brent for June settlement lost as much as 34 cents, or 0.6 percent, to $54.02 a barrel on the London-based ICE Futures Europe exchange. Prices rose 19 cents to $54.36 on Wednesday. The global benchmark crude traded at a premium of $2.76 to WTI for June.
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U.S. crude production climbed 52,000 barrels to 9.2 million barrels a day last week, according to the Energy Information Administration. The nation’s output has been expanding every week since February, the longest run of gains since March 2015.
Inventories rose 1.6 million barrels to 535.5 million barrels, the highest level in weekly EIA data compiled since 1982, while analysts surveyed by Bloomberg forecast a 150,000-barrel drop. Refineries processed 16.4 million barrels a day of crude in the week ended March 31, up 203,000 barrels from the prior week and the highest since January, the EIA data show.
Saudi Arabia lowered oil pricing for European customers, a sign the world’s biggest crude exporter is seeking to expand market share in the region dominated by Russia. China is set to import record amounts of crude oil from West Africa this month as OPEC’s supply cuts pave the way for other nations to gain a greater foothold in the fast-growing Asian market.