US inventories hit new high but prices stabilise

Opec and Russia stick to output cuts but US crude stocks and drilling both rise

OIL futures were little changed midweek despite yet another set of bearish data from the US, which showed record levels of crude inventories in the world’s largest consumer.

US crude stocks jumped 9.5 million barrels last week, the US Energy Information Administration (EIA) said, nearly three times more than forecasts.

Crude inventories rose to a peak at 518 million barrels, while gasoline stocks also hit a record, rising by 2.8 million barrels to 259 million barrels.

Oil prices initially dipped on the back of the hefty inventory rise but later tuned positive before going into negative territory again.

A stronger dollar also helped drive down the price, as users of other currencies have to pay more for oil which is priced in dollars.

Benchmark Brent futures was trading at around $55.70 per barrel in late London trade, while US light was fetching $53 per barrel in mid-day trading.

In the middle of last week, Brent was trading at $54.48 per barrel while US crude was fetching $52.52. Higher crude prices have spurred drilling in the US, depressing the oil market despite cuts by Opec to prop up prices.

Futures slid 1.7% in New York on Monday, the biggest drop in more than three weeks, reflecting the relentless build in US inventories.

However, oil has stayed above $50 per barrel since Opec and 11 other nations started curbing supply from 1 January in a bid to ease a global glut.

Meanwhile, US oil companies increased the rig count to the highest since October 2015. The EIA sees US shale-oil output jumping next month to its highest level since May 2016.

A monthly report from Opec at the beginning of the week showed the group lowered production by about 890,000 barrels per day in January.

Saudi Arabia, the largest Opec exporter, reduced output by 717,600 bpd last month.

Opec and other producers such as Russia have pledged to curb output by almost 1.8 million bpd in the first half of 2017 as part of efforts to prop up prices.

Nevertheless, their action has been countered by rising US stocks and a revival of US oil output.