Oil trades near US$68 as inventory and OPEC output weigh on market

-A +A

(Aug 2): Oil traded near US$68 a barrel, after sliding for two consecutive sessions as rising U.S. inventories and higher output from OPEC and Russia weighed on the market.

Futures in New York were little changed, following a 3.5% slide in the past two sessions. U.S. government data Wednesday showed a surprise gain in nationwide stockpiles. Meanwhile, the Organization of Petroleum Exporting Countries’s July output climbed as Saudi Arabia pumped near-record volumes, while Russia boosted production to levels not seen since it joined the cartel in a coordinated cut in January 2017.

Oil last month posted the worst loss in two years on concern a trade war between the U.S. and China could curb economic growth and limit energy demand. 

Under constant pressure from U.S. President Donald Trump to cool prices, OPEC and its allies are fulfilling a pledge made in June to increase output to ease concerns over potential supply disruptions in countries such as Iran and Venezuela.

“We’re seeing continued negative sentiment, driven by worries over growth and demand,” said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen.

West Texas Intermediate crude for September delivery traded at US$67.28 at 10:36 a.m. in London. The contract declined US$2.47 in the previous two sessions. Total volume traded was about 30% below the 100-day average.

Brent for October settlement fell 26 cents to US$72.13 a barrel on the London-based ICE Futures Europe exchange. The contract dipped US$1.82 on Wednesday. The global benchmark traded at a US$5.91 premium to WTI for the same month, after the spread widened to as much as US$11.43 in June.

U.S. crude inventories rose 3.8 million barrels last week, according to data from the Energy Information Administration. That’s compared with a forecast for a 3-million-barrel decline in a Bloomberg survey of analysts. Stockpiles at the Cushing storage hub in Oklahoma fell for an 11th straight week.

Traders also are weighing output from OPEC and its allies, following their accord in June to increase production. Saudi Arabia’s production increased by 230,000 barrels a day in July to 10.65 million barrels per day. Higher crude output from the Saudis, along with Nigeria and Iraq, pushed up the group’s total oil output by 300,000 barrels a day last month.

Meanwhile, Russia boosted its oil production in July to just below the post-Soviet record set in October 2016, Energy Minister Alexander Novak said. The nation produced about 11.21 million barrels a day, a jump of 140,000 from a month earlier, according to Bloomberg calculations based on the ministry’s data.

Other oil-market news:

The Trump administration said it’s weighing whether to increase the proposed tariff on US$200 billion of Chinese goods from 10% to 25%, stepping up pressure on Beijing to change its trade practices. 

Observed exports of crude and condensate from the Persian Gulf fell in July, dropping to the lowest level since January, according to Bloomberg tanker tracking.