Oil prices continue to fall ahead of US inventory data | Energy News
Crude prices remain above the level needed to encourage US producers to increase production, some analysts say.
Oil fell for a third straight session on Wednesday as investors locked in profits from recent gains while expecting inventory data from the United States, due later today for direction guidance prices.
Brent for May fell 56 cents, or 0.8%, to $ 66.96 a barrel at 4:14 a.m. GMT, while US West Texas Intermediate crude for April was $ 63.56 a barrel, down of 45 cents, or 0.7%.
Prices were supported last week by the decision of the Organization of the Petroleum Exporting Countries (OPEC) and allied producers – collectively known as OPEC + – to largely maintain production cuts in April. They then jumped first on Monday, with Brent surpassing $ 70 a barrel, after the Yemeni Houthi attacks on Saudi Arabia’s oil core, before recovering as alarms subsided.
“It’s a realization that the attack had no impact on supply,” said Virendra Chauhan, Singapore-based analyst at consultancy Energy Aspects.
A combination of factors including China and India, the major importers, pulling crude out of storage at current high prices and expectations of a return of Iranian supplies have also cooled prices, he added.
Oil is still up over 30% this year as the market tightens amid reduced production from Saudi Arabia and OPEC +, and demand outlook improves with deployment COVID-19 vaccines.
The main consumers are suffering
Higher prices may be good for oil producers, but force major global consumers to rethink their strategies.
“Demand is expected to improve and supply continues to decline, but some are feeling the burden of this massive rally,” said Kim Kwangrae, commodities analyst at Samsung Futures Inc. “It’s a mixed market.”
According to the chairman of Hindustan Petroleum Corp. Production cuts are also having an impact on the shipping market, with tanker owners. lose money transporting oil on a key route to China.
In the United States, crude inventories rose 12.8 million barrels in the week to March 5, trade sources said, citing data from industry group the American Petroleum Institute. Analysts expected an accumulation of around 800,000 barrels in a Reuters poll.
Official figures from the Energy Information Administration (EIA) are due Wednesday at 10:30 a.m. EST (3:30 p.m. GMT).
At the same time, higher prices are expected to bring more crude back online in the United States.
U.S. crude production is expected to decline another 160,000 barrels per day (b / d) in 2021 to 11.15 million b / d, the EIA said on Tuesday, but this is a drop lower than its previous monthly forecast of a decline of 290,000 bpd.
The OPEC + group could be a victim of its own success, analysts at EFG bank said; The rise in crude prices due to their adherence to the agreed reductions could incentivize US producers who are not part of the group.
“The current price of WTI oil is well above the level needed to incentivize a substantial increase in US production, which Dallas Fed and Kansas City Fed surveys have found to be around 56. dollars a barrel, ”EFG said.
“The longer it stays above this threshold, the more American and other non-OPEC + producers are encouraged to increase their production.”