Oil prices hit 3-month low on US inventories
22 Mar 2017 - 21:46
London: Oil prices slipped to three-month lows yesterday after data showed US crude inventories rising faster than expected, piling pressure on Opec to extend output cuts beyond June.
A deal between the Organization of the Petroleum Exporting Countries and some non-Opec producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has had little impact on bulging global stockpiles of oil.
Opec, which sources say is increasingly leaning towards extending cuts, has broadly delivered on pledged reductions so far, but non-Opec states have yet to cut fully in line with commitments.
"Opec has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling," said Ole Hansen (pictured), head of commodity strategy at Saxo Bank.
Benchmark Brent crude was down 75 cents at $50.21 per barrel at 1103 GMT, after dropping to $50.05, its lowest level since Opec announced on Nov. 30 its plan for cuts. The deal with non-Opec states was reached in December.
US light crude was down 68 cents at $47.56 a barrel, also slipping towards a three-month low. The American Petroleum Institute said on Tuesday that US inventories climbed by 4.5 million barrels to 533.6 million last week, outpacing analyst forecasts of 2.8 million. Investors now want to see whether Wednesday's figures from the Energy Information Administration, a unit of the US Department of Energy (DoE), confirm the rise.
"A look below $50 (for Brent) is quite possible today if DoE data show a similar pattern, but it's impossible to say how far below $50," Commerzbank analyst Carsten Fritsch said.
US shale oil producers have been adding rigs, pushing up the country's oil production to about 9.1 million bpd, from around 8.5 million bpd in late 2016. Opec's market intervention has not yet resulted in significant visible inventory drawdowns.