Oil prices mixed in choppy trade, rising U.S. production weighs

Apr 21, 2017, 16:43
Oil prices mixed in choppy trade, rising U.S. production weighs

Oil had rallied above $53 a barrel after some members of the Organization of Petroleum Exporting Countries voiced support for prolonging cuts past June, but rising USA output is undermining the effort to trim a global glut.

A preliminary Reuters poll showed analysts expected United States crude stocks to have fallen in the week to April 14, building on a surprise decline the previous week. The U.S. oil-rig count has been on the rise 13 weeks and now stands at its highest level in two years, according to oil-field services firm Baker Hughes Inc.

OPEC leader Saudi Arabia tightened February crude oil exports to the lowest since mid-2015, official data showed on Tuesday.

Members of the OPEC are cutting oil production by 1.2 million bpd from January 1 for six months, the first reduction in eight years.

"A build to gasoline inventories is tilted a little bearish, although a build of 2.5 million barrels on the Gulf Coast was in response to higher refining activity", said Matt Smith, director of commodity research at ClipperData.

USA supplies of crude are still near records and more than 100 million barrels higher than the five-year average for this time of the year, data compiled from the EIA show.

Brent crude has gained about 19 percent since OPEC chose to pare output, and the benchmark grade was 24 cents higher at $55.13 a barrel at 11:59 a.m.in London.

Traders said that the rising U.S. crude production posed a concern that the oil supply overhang would continue, while the jump in gasoline stocks implied a stutter in demand.

May West Texas Intermediate crude CLK7, -3.95% lost 15 cents, or 0.3%, at $52.26 a barrel on the New York Mercantile Exchange.

"After all, the oil price has stopped reacting to the factors which would normally support it ever since the Saudi oil minister (Khalid) al-Falih put at least something of a dampener on such expectations", he said, referring to Falih's comments to Al-Arabiya television on how it could be premature to discuss an extension to OPEC's supply cuts. Russian Federation and 10 other non-OPEC producers agreed to cut half as much.The accord has lifted oil prices, which are near $55 a barrel.

Saudi Arabia committed to lower its output by 486,000 barrels a day to 10.058 million a day while Iraq agreed to cut by 210,000 barrels a day.

Oil dropped the most in six weeks after a report showed USA gasoline supplies increased for the first time since February, while crude output keeps rising.

"The market sentiment appears to be that the increase in USA shale production outweighs the OPEC action and the market is keeping the loss we had yesterday", he said.

Despite strong gains in crude oil prices since last month, triggered in part by geopolitical tensions, the International Monetary Fund said it expected the price of oil to average $55 per barrel in 2017-18.