22 March 2017, London — Oil prices slipped back toward three-month lows on Wednesday after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.
A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has had little impact on bulging global stockpiles of oil.
Brent crude, the international benchmark, fell 35 cents to $50.61 per barrel by 0907 GMT, heading back to its lowest level since OPEC announced on Nov. 30 its plan for cuts. The deal with non-OPEC states was reached in December.
U.S. light crude was down 35 cents at $47.89 a barrel, also heading back toward a three-month low.
“The lower the price goes, the higher the pressure on OPEC to extend cuts,” Commerzbank analyst Carsten Fritsch said.
Sources have said OPEC is inclined to extend but wants backing from non-OPEC producers, including Russia, even though such countries have yet to deliver fully on existing cuts.
On Tuesday, the American Petroleum Institute reported U.S. inventories climbed by 4.5 million barrels to 533.6 million last week, a bigger rise than the 2.8 million analysts forecast.
Investors now want to see whether Wednesday’s figures from the Energy Information Administration, a unit of the Department of Energy (DoE), confirm the rise.
“A look below $50 (for Brent) is quite possible today if DoE data show a similar pattern, but it’s impossible to say how far below $50,” Commerzbank’s Fritsch said.
U.S. shale oil producers have been adding rigs, pushing up the country’s oil production to about 9.1 million b/d, from around 8.5 million b/d in late 2016.
“OPEC’s market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience,” U.S. bank Jefferies said in a note.
The bank said OPEC-led cuts would start having an impact in the second half of 2017, but added that U.S. crude production was expected to grow by 360,000 b/d in 2017 and 1 million b/d in 2018.
U.S. bank Goldman Sachs warned its clients in a note this week that a U.S. shale-led production surge “could create a material oversupply in 2018-19”.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson