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Oil climbs, but record U.S. crude output, higher OPEC supplies drag

Published 05/06/2018, 01:32
Updated 05/06/2018, 01:40
© Reuters. A view of Mexico's national oil company Pemex's refinery in Salamanca
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By Jane Chung

SEOUL (Reuters) - Oil prices edged higher on Tuesday after falling nearly 2 percent in the previous session, but growing U.S. production and expectations of higher OPEC supplies continue to weigh on sentiment.

Brent crude futures (LCOc1) added 15 cents, or 0.2 percent, to $75.44 a barrel at 0020 GMT, after settling down 2 percent at $75.29 a barrel on Monday.

U.S. West Texas Intermediate (WTI) crude (CLc1) was up 28 cents, or 0.4 percent, at $65.03 a barrel. It finished the previous session 1.6 percent lower at $64.75 a barrel.

"It's all about supply, whether it's OPEC raising output or U.S. increasing production, all roads lead to higher global oil supplies, which is leaving oil traders shaking in their boots," said Stephen Innes, head of trading for Asia-Pacific at futures brokerage OANDA in Singapore.

The Organization of the Petroleum Exporting Countries (OPEC) is due to meet in Vienna on June 22 to decide whether the group and non-OPEC members including Russia will raise production to ease concerns over potential supply shortfalls from Iran and Venezuela.

Over the weekend, OPEC and non-OPEC Arab oil ministers agreed on the need for continued cooperation to balance global supply, Kuwait's state news agency KUNA reported.

Increasing U.S. crude oil production has also put pressure on oil prices.

In March, U.S. crude output rose to 10.47 million barrels per day, the highest on record, according to a monthly report by the Energy Information Administration (EIA).

The number of rigs drilling in the United States was also up by two in the week to June 1, bringing the total to 861, the most since 2015, General Electric Co's (N:GE) Baker Hughes energy services said on Friday.

Industry group American Petroleum Institute (API) is due to release its data for last week's U.S. crude oil inventories at 2030 GMT on Tuesday, and the EIA report is scheduled at 1430 GMT on Wednesday.

© Reuters. A view of Mexico's national oil company Pemex's refinery in Salamanca

U.S. crude stocks were forecast to fall about 2.5 million barrels on average in the week ended June 1, according to five analysts polled ahead of the reports.

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