TOKYO (Feb 24): Oil prices held gains on Friday on data showing US stockpiles rose for a seventh straight week but at a pace that was well below expectations, and news of oil being sold out of storage in Southeast Asia.
US West Texas Intermediate was unchanged at US$54.45 a barrel by 0526 GMT, pulling back from early losses. WTI was on track for a weekly gain of about 2%, which would be its biggest so far this year.
Brent crude was up 3 US cents at US$56.61 and was on track for a weekly gain of about 1.4%.
US crude inventories rose by 564,000 barrels in the week to Feb 17, up for a seventh week, although below analysts' expectations for an increase of 3.5 million barrels, the Energy Information Administration (EIA) said.
The Organization of the Petroleum Exporting Countries and producers including Russia have pledged to cut production by around 1.8 million barrels per day (bpd) to tackle a global glut that has kept prices depressed since 2014.
While OPEC appears to be sticking to its deal, producers that were not part of the deal, particularly US shale drillers, have increased output, driving the growth in inventories in the United States, the world's biggest oil consumer.
"Current oil prices are neither sustainable for OPEC or the industry," AB Bernstein said in a note on Friday. "As such, inventories will have to fall, which we expect will be clearer in the spring after the seasonal build."
Signs are emerging that this is happening in Asia with traders selling oil held in tankers anchored off Malaysia, Singapore and Indonesia, Reuters reported on Friday.
More than 12 million barrels of oil has been taken out of storage in tankers berthed off Southeast Asian countries this month, shipping data in Thomson Reuters Eikon shows.
Traders have been benefiting from a market feature known as contango where prices for later delivery are higher than those for immediate dispatch. But the future premium is falling and future prices may slip below spot prices, known as backwardation.
"Tightening fundamentals will push the crude market into backwardation in the coming months," BMI Research said in a note. This "will benefit participants in the paper market but hamper the profits of oil traders who are unable to exploit the cash and carry arbitrage."