Mubasher: Oil futures extended their drop on Wednesday, after US crude stockpiles unexpectedly built up, and the head of Russian oil giant Rosneft voiced his scepticism about withholding supplies, Reuters reported.
By 8:15 am GMT, US Nymex crude futures dropped by 0.77% to $53.07 per barrel (pb), while international benchmark Brent futures fell by 0.52% to $61.65 pb.
Oil prices dropped on Tuesday sharply as worries over a slowdown in global demand growth, but losses were capped after expectations of a cut in US interest rates stoked a rally of equity markets worldwide.
US crude inventories jumped unexpectedly by 3.5 million barrels to 478 million in the week ended 31 May, according to industry group, the American Petroleum Institute (API).
Meanwhile analysts polled by Reuters expected a weekly fall of 849,000 barrels. The US Energy Information Administration’s (EIA) official report pertaining the crude stockpiles is due to be released later in the day.
“It was a very bearish number and if confirmed by the EIA it will hammer prices,” Bangkok-based SPI Asset Management managing partner Stephen Innes was quoted by the news agency.
In addition, the head of Russian state oil producer Rosneft Igor Sechin questioned the point of a deal with the Organization of the Petroleum Exporting Countries (OPEC) to trim supplies.
Russia should ramp up production at will, Sechin said, adding that a compensation will be sought, should the government extend the supply restraints.
Members of the producer club and non-affiliated partners, including Russia, an alliance known as OPEC+, agreed to withhold output since the start of this year in order to prop prices and clear a market glut.
The group is due to decide later this month or early next whether to keep the supply cuts in place.
“The decision is always dependent on price and with oil markets trading at the lower end of the market broader range I think it’s a lock, especially with the multitude of uncertainties on the macro front,” Innes said.
Further pressuring crude prices and subduing OPEC+ efforts to tighten the market has been concerns about a slowing global expansion against the backdrop of a trade conflict between the US and China and Washington’s threat last week to slap Mexican imports with tariffs.
