Oil edged lower on Wednesday, after USA data showed a smaller-than-expected decline in overall crude inventories coupled with another rise in production, hindering OPEC's efforts to reduce a global surplus of crude. USA crude inventories were at 532.3 million barrels, only about 3 million barrels less than the record reached in March. Data from the American Petroleum Institute showed on Tuesday that although crude inventories fell by 840,000 barrels in the week to April 14, they remained near record highs. Price drops accelerated as the dollar strengthened against its peers, curbing the appeal of commodities.
A number of key OPEC members including top exporter Saudi Arabia support extending their supply cut into the second half of 2017 if all participating producers, including Russian Federation and other non-OPEC countries, agree, OPEC sources have told Reuters.
Brent for June settlement fell 83 cents, or 1.5%, to $54.06/bbl on the London-based ICE Futures Europe exchange. It was the lowest close since March 31. The global benchmark crude traded at a $1.97 premium to June WTI.
The report also stated that oil production in February increased to ten million bpd from 9.75 million bpd in January as more oil was processed by domestic refiners. Output in the lower-48 states rose 21,000 barrels a day to 8.72 million, also the highest since August 2015.
"There's been a lot of attention paid to OPEC production cuts, while nearly nobody has focused on the gains elsewhere", Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by phone. Stocks have dropped sharply in the last several weeks and have fallen below levels seen at this time a year ago, but are still higher than where inventories have been in this decade. "The reasons are twofold". Historically, periods of weak crude oil prices coincided with the contango structure. Analysts and traders surveyed by The Wall Street Journal had predicted that gasoline supplies would drop by 2 million barrels.
Crude fell in the previous two sessions, but it received a boost from comments on Wednesday by the secretary-general of the Organization of the Petroleum Exporting Countries that the group was committed to cutting inventories to the five-year average.