Oil resumes drop on signs US crude stockpiles extended gains

Workers look at a drilling rig at a well pad of the Rosneft-owned Prirazlomnoye oil field outside the West Siberian city of Nefteyugansk, Russia, August 4, 2016. REUTERS

HONG KONG: Oil resumed its decline as industry data showed U.S. crude stockpiles extended gains, exacerbating an inventory overhang.

Futures lost as much as 1.4% in New York after rising 1.8% in the previous three sessions. The American Petroleum Institute signaled U.S. inventories probably climbed a second week, ahead of Energy Information Administration data which is forecast to show a decline. OPEC output rose in May as Libya and Nigeria revived production halted by attacks and political crises, a report from the group showed Tuesday.

Oil is extending its slump below US$50 a barrel amid speculation increasing U.S. supplies will counter production curbs by the Organization of Petroleum Exporting Countries and allies including non-OPEC member Russia. Output at major American shale fields will reach a record in July, according to the EIA.

“The market has weakened on the API data,” said David Lennox, a resource analyst at Fat Prophets in Sydney. 

“Investors will be watching the EIA numbers like a hawk to see if that increase is confirmed. There is an improvement in global demand, but not enough to drive prices at this stage.”

West Texas Intermediate for July delivery slid as much as 63 cents to US$45.83 a barrel on the New York Mercantile Exchange, and was at US$46 at 10:41 a.m. in Hong Kong. Total volume traded was about 12% below the 100-day average. Prices gained 38 cents to US$46.46 on Tuesday.

Brent for August settlement lost as much as 54 cents, or 1.1%, to US$48.18 a barrel on the London-based ICE Futures Europe exchange. Prices added 43 cents, or 0.9%, to US$48.72 on Tuesday. The global benchmark crude traded at a premium of US$2.10 to August WTI.

U.S. crude inventories added 2.75 million barrels last week, while gasoline stockpiles increased by 1.79 million barrels last week, the API said Tuesday, according to people familiar with the data. The EIA is forecast to report crude slid 2.45 million barrels and motor fuel inventories dropped by 1.15 million barrels, according to the median estimate in the Bloomberg survey. - Bloomberg