28 April 2015 – Oil fell more than 1% on Tuesday ahead of weekly US crude inventory data that is expected to hit another high and as Saudi Arabia pledged to supply more oil to China if needed.
US commercial crude stockpiles were expected to have risen for a 16th straight week last week, up from a record 489 million barrels even as drilling activity fell, a preliminary survey by Reuters showed on Monday.
Comments made by top Saudi oil officials on Monday reiterated the country’s position of keeping production high to meet demand as it maintains its market share.
Brent June crude futures had dropped 83 cents to $64.00 a barrel in early trading on Tuesday. US June crude had declined 85 cents to $56.14 a barrel.
The fall in prices “reflects the major gains that have been made in the last few weeks and a little bit of concern over what the inventory numbers in the US might show,” said Michael McCarthy, chief strategist at CMC Markets in Sydney.
Brent crude hit 4.5 month high last week, while West Texas Intermediate (WTI) has risen for six consecutive weeks, underpinned by net long positions on both contracts as speculators bet on a decline in US shale output.
The number of active US rigs drilling for oil has fallen to the lowest since 2010 and the US Energy Information Administration expects to see a drop in oil output in May from April, the first monthly decline in four years.
“It’s pretty clear production is being pulled back and finally we’re seeing the impact of lower rig counts,” McCarthy said.
“There is potential for a bounce back in inventories if that was only a temporary aberration, but, of course, if the recent trend continues, we should see some support.”
The two oil benchmarks are sitting above key technical levels, with Brent above $64-$64.50 and WTI above $56, he said.
Bets on rising Brent crude prices rose for a fifth straight week to a new record, InterContinental Exchange (ICE) data showed on Monday.