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Tokyo - Oil rebounded toward $63 a barrel from its first drop in four sessions as investors weighed record compliance to output curbs by OPEC and its allies against expanding US supplies and a broader selloff in risk assets.
Futures in New York rose as much as 0.4% after slipping 0.5% on Monday. While US crude inventories are forecast to have grown by 3.4 million barrels last week, that prediction calls for a slower pace of expansion than the week prior.
The Organisation of Petroleum Exporting Countries and its partners, which are trying to ease a global glut via output cuts, are said to have complied with pledged curbs at a rate of 138% in February.
Oil has swung around this month after registering its worst February decline in half a decade as a global equity market rout spread to commodities. US crude production that has boomed to a record as well as rising American inventories are prompting speculation that OPEC and its allies will have to extend output cuts into 2019 to reach the group’s goal of reducing inventories to their five-year average.
“US shale production is putting a big cap on oil prices,” Satoru Yoshida, a commodity analyst at Rakuten Securities, said by phone from Tokyo. Still, “the oil market is quite firm. Even if prices fall for various reasons, they rebound fairly quickly and there’s buying support there.”
West Texas Intermediate for April delivery, which expires on Tuesday, climbed as much as 25 cents to $62.31 a barrel on the New York Mercantile Exchange and traded at $62.26 by 1:47 pm in Tokyo. The contract fell 28c to $62.06 on Monday. The more-active May contract climbed 20c to $62.33. Total volume traded was about 33% below the 100-day average.
Brent for May settlement gained 21c to $66.26 on the London-based ICE Futures Europe exchange, after slipping 0.2% on Monday. The global benchmark crude traded at a $3.92 premium to WTI for the same month.
Nationwide crude inventories are at their highest since December and probably added 3.4 million barrels last week, according to a Bloomberg survey before the Energy Information Administration data due on Wednesday. While supplies are set for a fourth weekly advance, the forecast build is smaller than a 5-million-barrel increase the week earlier.
The Joint Technical Committee last month saw a record compliance rate from OPEC members and its allies, according to people with knowledge of the matter. The OPEC-12 compliance was 142%, while non-OPEC countries were at 13%, one person said, asking not to be named because the figures are not public.
In the meantime, stocks in Asia dropped for a third day, adding bearishness to oil markets. The MSCI Asia Pacific Index fell as much as 0.8%, following US equities lower after a sell-off in technology shares dampened investor sentiment toward risky assets.
Other oil-market news:
• Saudi Arabia’s exports of diesel and gasoline soared to a record in January, underscoring a big advantage the world’s largest oil exporter has over other producers who’re more dependent on shipments of lower-value crude.
• While US shale explorers are pumping record amounts of oil, the growth rate is flattening out for one closely watched category, drilled-but-uncompleted wells.
• Bearish options bets on the WTI curve are near the lowest in more than four years, according to the latest CFTC data, despite the prompt WTI spread flipping to contango.
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