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Seoul - Following a two-week rollercoaster where oil dropped with global equities and then rebounded from the rout with other risk assets, investors may now take further price cues from upcoming US stockpiles data.
Crude in New York lost as much as 1.3% after closing at a two-week high on Tuesday, propped up by optimism that a global glut may be dissipating at a faster pace than expected.
The focus will now shift to US inventories, which are forecast to have risen by 3 million barrels last week. As OPEC and its allies including Russia persist with output curbs, a boom in American supplies could undermine their efforts to re-balance the market.
While crude was swept up in a flight from risk assets and subsequent recovery earlier this month, the direction of prices still hinges on the success of a bid by the Organisation of Petroleum Exporting Countries and its partners to clear an oversupply.
The group’s Secretary-General Mohammad Barkindo said the market re-balance is gaining traction. Still, the effort could come under strain if any one country relents, and US shale production is another threat.
“If the market sees US crude stockpiles rising faster than it expects, this could further add downward pressure on prices,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “Whether the OPEC members can continue to prolong their alliance with Russia is something we need to monitor because there may be conflicting views.”
West Texas Intermediate for April delivery lost as much as 77 cents to $61.02 a barrel on the New York Mercantile Exchange, and traded at $61.16 at 08:58. Total volume traded was about 11% below the 100-day average. The March contract expired on Tuesday after adding 22c to $61.90.
Brent for April settlement slipped 52c to $64.73 a barrel on the London-based ICE Futures Europe exchange. Prices dropped 0.6% to $65.25 on Tuesday. The global benchmark traded at a $3.56 premium to WTI.
After about four years of crude oversupply, the global market will finally re-balance in the second or third quarter, earlier than previously estimated, according to people familiar with OPEC’s deliberations.
By some estimates, bloated oil stockpiles have already shrunk back to average levels, but the group shows no signs of easing off as Saudi Arabia seeks higher prices to buttress the historic initial public offering of its state energy producer.
Still, concerns remain that higher prices could encourage shale producers to pump more. US inventories have rebounded since late January and kept above 420 million barrels this month, according to the Energy Information Administration data.
Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, probably fell by 2.5 million barrels last week, according to a survey compiled by Bloomberg.
Oil-market news:
• Production at the largest US oil field is set to rise for an 11th straight month to a fresh record in February, according to a forecast from consultant Rystad Energy.
• The United Arab Emirates will deliver at least 100% of supply cuts this year, Energy Minister Suhail Al Mazrouei told reporters in London.
• Gasoline futures were down 0.7% to $1.7383 a gallon on Wednesday.
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