TOKYO: Oil is headed for its first weekly drop since early March as uncertainty over the future of global producer curbs, Iranian exports and US inventories kept investors on edge.
New York futures traded below US$64 a barrel, holding a 0.5% loss from the previous session. While government data on Wednesday showed US inventories slid last week, the drop was less than half what an industry report indicated.
Meanwhile, as speculation swirls over whether the Organisation of Petroleum Exporting Countries (Opec) and its allies will extend output cuts, Asian buyers of sanctioned Iranian oil are said to be putting purchases on hold as they await a White House decision on waivers.
While oil has advanced over 40% this year on the back of the Opec+ coalition’s supply curbs, the rally’s run out of steam in the past couple of weeks.
May could be a pivotal month for the market as the US decides on whether to extend waivers allowing some countries to keep buying Iranian crude, while a meeting of Opec and its allies in Saudi Arabia may provide clues on future production levels.
“Investors are taking a wait-and-see stance ahead of events in May, including the expiry of waivers on US sanctions on Iran and the Opec meeting,” said Kei Kobashi, a senior analyst at Sumitomo Corp Global Research Co.
“It will remain difficult to make bets until May because there is so much uncertainty.”
West Texas Intermediate (WTI) for May delivery fell 4 cents to US$63.72 a barrel on the New York Mercantile Exchange as of 11:39am in Singapore yesterday.
The contract dropped 29 cents to US$63.76 on Wednesday. It’s down 0.3% since April 12. Both WTI and Brent won’t trade today due to a holiday.
Brent for June settlement dropped 13 cents to US$71.49 a barrel on the London-based ICE Futures Europe exchange. The contract fell 10 cents to US$71.62 on Wednesday and is little changed so far this week. The global benchmark crude was at a premium of US$7.74 to WTI for the same month.
Before the Energy Information Administration released its crude inventories data on Wednesday, which showed the first drop in four weeks, the American Petroleum Institute was said to report a decline of 3.1 million barrels.
The median forecast in a survey of analysts by Bloomberg before the government data pointed to an increase of 2.3 million barrels in US stockpiles.
Russian Energy Minister Alexander Novak said on Wednesday there would likely be discussions about whether Opec and its allies would extend production cuts at their meeting in Jeddah next month.
His nation’s average output cuts in April would conform to the Opec+ coalition’s deal, he said, adding that it’s too early to talk about possible options for the group in regards to the future of the output reductions.
Most Asian crude buyers are avoiding imports from Iran for next month as it’s unclear what would happen to the US exemptions that are set to expire in the first week of May, people with knowledge of the matter said earlier this week. — Bloomberg