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Oil prices fall after surprise build in U.S. inventories

Published 05/06/2019, 02:16
Updated 05/06/2019, 02:20
© Reuters. The sun sets behind a pump-jack outside Saint-Fiacre
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TOKYO (Reuters) - Oil prices resumed their slide on Wednesday, dragged down by a surprise gain in U.S. inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with OPEC to withhold supplies.

Brent futures were down 33 cents, or 0.5%, at $61.64 a barrel by 0035 GMT. They rose 1.1% on Tuesday after a near 13 percent fall in the previous four sessions.

U.S. West Texas Intermediate (WTI) crude was down by 38 cents, or 0.7%, at $53.10 a barrel. The U.S. benchmark closed 0.4% higher on Tuesday.

Oil prices have fallen sharply on fears about slowing global demand, but won a respite on Tuesday after a global stock market rally on hopes of a cut in U.S. interest rates.

U.S. crude stocks rose unexpectedly last week, while gasoline and distillate inventories built more than expected, industry group the American Petroleum Institute said on Tuesday.

Crude inventories rose by 3.5 million barrels in the week to May 31 to 478 million, compared with analysts' expectations for a decrease of 849,000 barrels. [API/S]

Official numbers from the U.S. Energy Information Administration are due out later on Wednesday.

The oil market has been weighed down by concerns about slowing global growth from the U.S.-Sino trade war and President Donald Trump's threats last week to place tariffs on Mexican imports.

To prevent oversupply and prop up the market, the Organization of the Petroleum Exporting Countries (OPEC), together with allies including Russia, has been withholding production since the start of the year.

The group plans to decide later this month or in early July whether to continue the supply curbs.

But on Tuesday, the head of oil giant Rosneft, Igor Sechin, said Russia should pump at will and he would seek compensation from the government if cuts were extended.

Russia's average daily oil output has nonetheless dropped to a three year-low after contaminated crude clogged its main export route.

Further pressuring oil prices and undermining OPEC's efforts to tighten the market has been surging U.S. output to record highs, leading to more of its crude being exported.

"Does it make sense (for Russia) to reduce (oil output) if the U.S immediately takes (our) market share?" Sechin was quoted as saying by Interfax news agency.

© Reuters. The sun sets behind a pump-jack outside Saint-Fiacre

"We have to defend our market share," he said.

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