Oil Slides as Rising U.S. Stockpiles Stoke Glut Fears

James Thornhill

05 Jun 2019, 03:59 PM IST

(Bloomberg) -- Oil resumed its slide after a surprise jump in U.S. crude inventories stirred fears of a supply glut at a time when trade wars are already raising concerns about global demand.

Futures in New York were off 0.7%, after settling 0.4% higher Tuesday. The market has retreated around 20% from its April highs to sit on the cusp of a bear market. The American Petroleum Institute’s weekly report was said to show a 3.55 million barrel increase in U.S. stockpiles last week, compared with a 2 million decline predicted by analysts in a Bloomberg survey. API also reported a 9 million barrel surge in gasoline and distillate fuels.

The data hit a market already reeling from escalating trade tensions between the U.S. and China, and the Trump administration’s threat to slap tariffs on Mexico.

Oil Slides as Rising U.S. Stockpiles Stoke Glut Fears

Drivers
A further production cut from Saudi Arabia is “now on the table” after the rout in crude prices in recent weeks, says RBC Capital Markets’ chief commodity strategist Helima Croft. UBS analysts see crude rising towards $75 over the next three months due to the market being undersupplied while Societe Generale pinned its Brent oil price forecast to average $72.50 a barrel in the second half of the year. Extending the OPEC+ oil-production cuts deal may serve the interests of Saudi Arabia but not Russia, according to Rosneft chief executive Igor Sechin Saudi Aramco may have raised Asian prices for its flagship grade to the highest relative to benchmarks in more than five years, but the region’s refiners actually have reason to be relieved. A Norwegian oil-workers union reached a wage agreement with employers, avoiding a strike that would have cut the country’s crude and gas production by about 11%.

Drivers

A further production cut from Saudi Arabia is “now on the table” after the rout in crude prices in recent weeks, says RBC Capital Markets’ chief commodity strategist Helima Croft.
UBS analysts see crude rising towards $75 over the next three months due to the market being undersupplied while Societe Generale pinned its Brent oil price forecast to average $72.50 a barrel in the second half of the year.
Extending the OPEC+ oil-production cuts deal may serve the interests of Saudi Arabia but not Russia, according to Rosneft chief executive Igor Sechin
Saudi Aramco may have raised Asian prices for its flagship grade to the highest relative to benchmarks in more than five years, but the region’s refiners actually have reason to be relieved.
A Norwegian oil-workers union reached a wage agreement with employers, avoiding a strike that would have cut the country’s crude and gas production by about 11%.

Prices
WTI for July delivery fell 40 cents to $53.08 a barrel on the New York Mercantile Exchange as at 8:32 a.m. Sydney time. July WTI ended Tuesday up 23 cents at $53.48 a barrel. Brent for August settlement rose 69 cents to $61.97 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Keith Gosman