Hong Kong - Oil is losing momentum after the longest weekly
rally in two months, with confidence that US crude stockpiles are beginning
to shrink damped by concern that American drilling activity is increasing.
Futures were little changed in New York after falling 1 percent Monday,
following its third weekly advance. While data Wednesday may show US
inventories probably shrank for a second week, drillers in the nation have
added rigs for the past 13 weeks.
Citigroup Inc. says output cuts by the Organization of
Petroleum Exporting Countries will be able to offset the response from American
producers to higher prices. Goldman Sachs Group Inc. has called for the market
to be patient.
Stockpiles will start to decline significantly as
supply cuts from the Organization of Petroleum Exporting Countries continue,
Citi said in a report. Oil had rallied above $53 a barrel after some producers
voiced support for prolonging a six-month production curb by OPEC and its
allies past June.
“The market has had a good run higher amid Middle East
tensions and increased confidence that OPEC will extend its production
agreement beyond six months,” said Ric Spooner, a chief market analyst at CMC
Markets in Sydney.
“While US inventories
are going to decline, they are falling from a much higher level than they have
over the past two years. We’re also back into a price area that may attract
more shale oil production.”
West Texas Intermediate for May delivery was at $52.62 a
barrel on the New York Mercantile Exchange, down 3 cents, at 7:50 a.m. in London. Total volume
traded was about 36 percent below the 100, day average. Prices lost 53 cents to
$52.65 on Monday, the lowest close since April 7.
US Stockpiles
Brent for June settlement was 2 cents lower at $55.34 a
barrel on the London-based ICE Futures Europe exchange. Prices dropped 53
cents, or 1 percent, to $55.36 on Monday. The global benchmark traded at a
premium of $2.27 to WTI.
Read also: Investors pile into shale producers as oil price stalls
US
crude inventories probably shrank by 1.7 million barrels last week, according
to a Bloomberg survey before an Energy Information Administration report
Wednesday. Stockpiles climbed to 535.5 million barrels at the end of March, the
highest in weekly data compiled by Bloomberg since 1982.
Oil-market news
Oil producers are showing “very good” compliance with
pledged production cuts, Saudi Arabia’s
Energy Minister Khalid Al-Falih said Monday in Riyadh. While global supplies are rising
because of refinery maintenance, the market is rebalancing, he said.
Crude output at major US shale plays is forecast to climb
to 5.2 million barrels a day in May, the highest since November 2015, according
to the EIA’s monthly Drilling Productivity report. Stockpiles at Cushing, Oklahoma,
the delivery point for WTI and the nation’s biggest oil-storage hub, fell by
570,000 barrels last week, according to a forecast compiled by Bloomberg.
BLOOMBERG