Oil loses steam as fear over US supply returns to haunt prices

Seoul - Oil held losses below $62 a barrel on concerns that it may be facing a double whammy of rebounding American stockpiles and booming US production.

Futures were little changed, after dropping 1.1% on Monday. The US government expects major shale regions to boost output by 131 000 barrels a day in April, spurring fears that surging supplies will undermine Organisation of Petroleum Exporting Countries (OPEC)’s efforts to clear a glut.

Sentiment is being soured further as US inventories are forecast to have risen for a third week.

Oil has struggled to recover losses from last month’s broader market slump after climbing over $66 a barrel in January. While there’s renewed confidence over demand on a brighter economic outlook following a better-than-expected jobs report in the US, expanding American production continues to remain a challenge to the Organisation of Petroleum Exporting Countries and its allies including Russia that are trying to prop up prices via output curbs.

"Currently, there’s downward pressure on oil prices with concerns remaining over surging U.S. crude production,” Kim Kwangrae, a commodities analyst at Samsung Futures, said by phone in Seoul.

"Increasing output alone is a problem but, at the same time, we have American stockpiles rebounding, which may continue to challenge crude from recovering."

West Texas Intermediate for April delivery traded at $61.35 a barrel on the New York Mercantile Exchange, down 1 cent at 3:02 pm in Seoul. The contract declined 68 cents to $61.36 on Monday.

Total volume traded was about 53% below the 100-day average.

Brent for May settlement added 1 cent to $64.96 a barrel on the London-based ICE Futures Europe exchange. The contract dropped 54 cents to $64.95 on Monday. The global benchmark traded at a $3.66 premium to May WTI.

Production from shale regions will reach 6.95 million barrels a day next month, the US Energy Information Administration said in its monthly drilling productivity report. The Permian Basin is seen leading the way with an 80,000-barrel increase.

Total American output has passed 10 million barrels a day, beating a record set in 1970.

US crude inventories probably expanded by 1.9 million barrels in the week through March 9, according to a Bloomberg survey before Energy Information Administration data on Wednesday. Meanwhile, stockpiles at Cushing, Oklahoma, the delivery point for WTI futures, are forecast to have been little changed after 11 straight weeks of declines.

Oil-market news:

Workers at Libya’s Zawiya oil export terminal started a strike on Monday over delayed salary payments, according to people with knowledge of the matter, who asked not to be identified because they are not authorized to speak to media. Gasoline futures in New York are down 0.2% at $1.8895 a gallon.