London - Oil retreated from the highest closing level since July 2015 as markets remained adequately supplied even as OPEC’s output cuts began to take effect in the US.
Futures in New York are still set for an advance of 1.1% this week. US government data showed crude inventories rose less than expected last week as imports dropped the most since November. The slowdown in the expansion of record stockpiles may signal the production cuts by Organization of Petroleum Exporting Countries are starting to tighten supplies globally.
“While OPEC is curbing its output and it’s highly likely that we may see them extending their agreement, it is US shale oil that’s making the market oversupplied,” said Naeem Aslam, chief market analyst at brokers Think Markets UK in London. “We have seen seven straight weeks of crude inventory data ticking higher and this is impacting sentiment.”
Analysts from Goldman Sachs to Energy Aspects have said US stockpiles were boosted by deliveries of crude purchased before oil producers started cutting output in January.
While the inventory expansion, which has kept prices in a tight range above $50 this year, slowed last week, Citigroup says the glut OPEC created by boosting production just prior to their December deal means they will need to prolong their cuts beyond June.
West Texas Intermediate for April delivery was at $53.99 a barrel, down 46 cents, on the New York Mercantile Exchange as of 14:43 in London. Prices on Thursday rose 86c to close at $54.45, the highest settlement since July 2, 2015. Total volume traded was about 23% below the 100-day average.
Brent for April settlement dropped 51c to $56.07 a barrel on the London-based ICE Futures Europe exchange. The contract advanced 74c to $56.58 on Thursday and is headed for a 0.8% gain this week. The global benchmark crude traded at a $2.05 premium to WTI.
US inventories
Crude stockpiles climbed by 564 000 barrels last week to 518.7 million barrels, the US Energy Information Administration reported on Thursday. While total inventories are at the highest in weekly data going back to 1982, the increase trailed a 3.25 million-barrel gain projected by analysts surveyed by Bloomberg and is the smallest build this year.
Supplies at Cushing, Oklahoma, the biggest US storage hub and the delivery point for WTI, dropped by 1.53 million barrels, the steepest decline since October of last year.
Crude imports to the US fell 14% to an average 7.29 million barrels a day for the week ended February 17, compared with 8.49 million barrels in the previous week, according to preliminary EIA data. Oil exports from the world’s biggest economy surged to a record and domestic production rose to 9 million barrels a day last week.
OPEC and its partners achieved 86% of their agreed cuts last month, according to a statement on its website. The group’s Joint Technical Committee decided that producers “are on the right track towards full conformity” with supply cuts.
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