Oil Falls to Two-Week Low as U.S. Supply Gains Offset OPEC Cuts

(Bloomberg) -- Oil fell to the lowest in more than two weeks in New York as comments from some OPEC producers that the group will extend production cuts were offset by signs of rising supply.

Futures have slipped 5.5 percent this week as U.S. crude output climbed to the highest since August 2015. The first three months of supply curbs have failed to bring inventories below the five-year average, Saudi Arabia’s Energy Minister Khalid Al-Falih said at a conference in Abu Dhabi. Gulf Cooperation Council countries, including Saudi Arabia, agreed to push for an extension of the cuts on Wednesday, Oman Oil Minister Mohammed Al Rumhy said.

Oil Falls to Two-Week Low as U.S. Supply Gains Offset OPEC Cuts

Oil has closed lower every day this week after posting three weekly gains amid optimism the Organization of Petroleum Exporting Countries will extend the curbs. The GCC comprises OPEC members Saudi Arabia, Kuwait, Qatar and the United Arab Emirates, as well as Oman and Bahrain. OPEC will make a decision on whether to prolong the deal at its official ministerial meeting in Vienna on May 25, Secretary-General Mohammad Barkindo said in Abu Dhabi.

"OPEC is trying to talk the market up," Francisco Blanch, head of commodity markets research at Bank of America Merrill Lynch, said in a Bloomberg television interview. "Inventories aren’t coming down the way they hoped."

West Texas Intermediate oil for May delivery, which expired Thursday, fell 17 cents to $50.27 a barrel on the New York Mercantile Exchange. It was the lowest close since April 3. Total volume traded was near the 100-day average. The more active June futures slipped 14 cents to $50.71.

Brent for June settlement rose 6 cents to $52.99 on the London-based ICE Futures Europe exchange. The global benchmark closed traded at a $2.28 premium to June WTI.

"The OPEC cuts are partially going to be offset by rising production here," Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at U.S. Bank, which oversees $136 billion in assets, said by telephone. "The rig count continues to ramp up. We’re rushing in to fill the void OPEC provided when it cut production."

U.S. crude production rose by 17,000 barrels a day to 9.25 million a day last week, the Energy Information Administration said in a report Wednesday. Output has climbed for nine weeks. U.S. explorers added 11 oil rigs last week to cap the longest stretch of gains since 2011, Baker Hughes Inc. data show.

Oil-market news:

  • Russia is likely to support prolonging the OPEC-led cuts with other nations, according to a Bloomberg survey.
  • Exxon Mobil Corp. applied in 2015 for a waiver from U.S. sanctions against Russia that would allow it to drill in a venture with Rosneft PJSC in that country, a person with knowledge of the matter said.
  • BP Plc’s 2010 Gulf of Mexico oil spill caused damage to beaches, animals, fish, and coral that the public values at $17.2 billion, according to a financial accounting released on the seventh anniversary of the disaster.