Oil down amid rise in US inventories

LONDON, June 5, 2019 – A surprise rise in US inventories sent oil prices further down on Wednesday morning in Asia. In addition, Russian state oil producer Rosneft is also reportedly rethinking a deal with OPEC to withhold supplies.

US Crude Oil WTI Futures was down by 0.75%, at $53.08 a barrel by 11:23 PM ET (3:23 GMT). Although it closed 0.4% higher on Tuesday, the benchmark crude is still around 20% below its peak price in April 2018.

International Brent Oil Futures were down 0.44%, to $61.70 a barrel. The futures closed with an 1.1% increase on Tuesday after a near 13% fall in the previous four sessions.

Concerns over a global economic slowdown have led to fears about slowing oil demand, together with US President Donald Trump’s threat last week to place tariffs on Mexican goods, and the still ongoing Sino-US trade war, are considered to have contributed to the downward trend of oil prices.

The American Petroleum Institute (API) said on Tuesday that US crude stocks rose unexpectedly last week, while gasoline and distillate inventories grew more than expected. To the contrary of analysts’ expectations of a 849,000-barrel decrease, crude inventories rose by 3.5 million barrels in the week to May 31 to 478 million, according to the API.

The official inventory data from the US Energy Information Administration (EIA) is due to be released later in the day.

“It was a very bearish number, and if confirmed by the EIA it will hammer prices,” Stephen Innes, managing partner at SPI Asset Management in Bangkok was cited as saying by Reuters.

Saudi Arabia, the de-facto leader of the OPEC, was reported earlier this week to have hinted at extended supply cuts to support oil prices. But one of its allies may have a different opinion.

On Tuesday, the head of Russian oil giant Rosneft, Igor Sechin, was quoted by Interfax news agency as saying “Does it make sense (for Russia) to reduce (oil output) if the US immediately takes (our) market share?” He also reportedly suggested that Russia should pump at will, and he would seek compensation from the government if the cuts were extended.

OPEC, together with its allies, has been withholding production since the start of the year to prop up the market. The group plans to decide later this month or in early July whether to continue to withhold production or not.

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