Oil drops further below
$56 on report of U.S. inventory rise
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[March 08, 2017]
By Alex Lawler
LONDON
(Reuters) - Oil dropped further below $56 a barrel on Wednesday after an
industry report pointed to a large rise in crude inventories in the
United States, renewing oversupply concerns despite OPEC output curbs.
U.S. crude inventories rose by a more-than-forecast 11.6 million barrels
last week, data from industry group the American Petroleum Institute
(API) showed on Tuesday, ahead of the government's supply report due
later on Wednesday. [API/S]
"The API report is yet another proof that the market is by no means in
deficit at the moment," said Eugen Weinberg, analyst at Commerzbank.
"It's ample supply."
Brent crude <LCOc1>, the international benchmark, was down 55 cents at
$55.37 a barrel at 1201 GMT. U.S. crude <CLc1> fell 54 cents to $52.60.
If the API report of an inventory rise is confirmed by the U.S. Energy
Information Administration report at 1530 GMT, it would be the ninth
straight week of increases. Analysts had forecast a 1.9 million-barrel
inventory rise.
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"All eyes are on the EIA numbers," said Jeffrey Halley, senior market
strategist at Oanda in Singapore. "A big washout of that will see oil
test technical support levels."
U.S. crude supplies have continued to rise despite a supply cut that
started on Jan. 1 by the Organization of the Petroleum Exporting
Countries plus Russia and other non-members. Data has suggested high
compliance with the deal.
Total output reductions have exceeded 1.5 million barrels per day (bpd),
Saudi Energy Minister Khalid al-Falih said on Tuesday, out of the almost
1.8 million bpd pledged. He also said the results had exceeded the low
market expectations.
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![](../images/030817pics/busine42.jpg)
Pump jacks drill for oil
in the Monterey Shale, California, U.S. on April 29, 2013.
REUTERS/Lucy Nicholson/File Photo
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Oil is
also facing headwinds from a likely U.S. interest rate rise next week, a strong
dollar and rising U.S. oil production, which has been given a boost by the
OPEC-led effort to support prices.
The EIA now expects U.S. crude production in 2017 to rise by 330,000 barrels per
day to 9.21 million bpd, a bigger rise than previously forecast, according to
its monthly outlook on Tuesday. It had previously predicted U.S. output climbing
100,000 bpd compared with 2015.
OPEC is trying to get rid of a supply glut that is keeping oil prices at about
half their level of mid-2014. Rising U.S. inventories have raised speculation it
may extend the supply cut deal which runs until June.
Officially, OPEC maintains that it is too early to talk of extending the
agreement, a position reiterated by the Saudi minister on Tuesday.
(Additional reporting by Keith Wallis; Editing by Edmund Blair)
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