Oil prices slip as U.S. supply growth offsets OPEC support

[March 29, 2018]   By Amanda Cooper

LONDON (Reuters) - Oil lingered below this week's highs on Thursday, support from OPEC's commitment to controlling its output was partly offset by another rise in U.S. inventories.

The oil price touched $71 a barrel on Tuesday, near its high for the year, but has struggled to gain further traction since then, despite supportive comments from the Organization of the Petroleum Exporting Countries.

June Brent crude futures <LCOc2> were down 39 cents at $68.37 a barrel by 1128 GMT, while the May contract <LCOc1>, which expires later on Thursday, was down 9 cents at $69.44.

WTI crude futures <CLc1> fell 11 cents to $64.27 a barrel.

Oil has risen by 4 percent since January, on track for its third consecutive quarter of price increases and the longest stretch of quarterly gains since late 2010.

"Right now, oil looks fragile," Petromatrix strategist Olivier Jakob said. "The price action last week was pretty clear. The objective on that move was to take out the highs of 2018, but that's not been done and the price action of the last three days has not been very convincing,"

OPEC, Russia and some other non-OPEC producers started cutting output in January 2017, lifting the price of Brent - the benchmark for most of OPEC's exports - by about a quarter since.

Sources at OPEC said the group and its allies were likely to keep their deal on cutting output for the rest of 2018 when they meet in June.

But rising inventories and production in the United States has capped gains in crude prices. Commercial U.S. stocks rose by 1.6 million barrels in the last week <C-STK-T-EIA> to 429.95 million barrels, while output hit a record 10.43 million bpd, the Energy Information Administration (EIA) said.

An oil pump is seen operating in the Permian Basin near Midland, Texas, U.S., May 3, 2017. REUTERS/Ernest Scheyder/File Photo

Inventories tend to build over the first quarter of the year as refineries shut down for maintenance. U.S. crude stocks have risen by 5.5 million barrels, marking the smallest increase in the first three months of the year since 2003.

(Graphic: U.S. crude inventories see smallest Q1 build since 2003 - https://reut.rs/2pQmAhB)

"This is the third consecutive week of stock build at the WTI delivery hub, and as a result we continue to see the Brent-WTI spread widen," ING said in a note.

The premium of Brent over WTI has grown to nearly $5 a barrel, the highest since January, up from about $2.70 a month ago, making Brent-linked crudes less attractive to refiners than U.S. oil.

This week marked the launch of the Shanghai crude oil futures contract <ISCc1>, which has lost about 10 percent since it first opened on Monday. It ended Thursday's session at 409.7 yuan ($65.18) a barrel.

(For a graphic on global crude futures volumes by contract click https://reut.rs/2GkLih8)

($1 = 6.2856 Chinese yuan renminbi)

(Additional reporting by Henning Gloystein in SINGAPORE; Editing by xxxxx)

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