Oil Extends Loss

Oil extended losses after a bigger than expected jump in U.S. stockpiles overshadowed a deepening crisis in Venezuela and the prospect of OPEC+ extending their production cuts.

(Bloomberg) — Oil extended losses below $64 a barrel after a bigger-than-expected jump in U.S. stockpiles overshadowed a deepening crisis in Venezuela and the prospect of OPEC and its allies extending their production cuts.

Futures in New York fell as much as 0.6 percent after dropping 0.5 percent Wednesday. U.S. crude inventories beat analyst and industry estimates to climb to the highest since 2017 last week and production rose to a record, the Energy Information Administration said Wednesday. Venezuelan President Nicolas Maduro hung onto power after an attempted uprising, while Saudi Arabia said that the OPEC+ output cuts could be extended through the end of the year.

The swelling American stockpiles are limiting oil’s upside as the market prepares for less Iranian barrels after the end of U.S. waivers allowing some countries to keep buying. Production from Venezuela also looks set to keep declining, with RBC Capital Markets predicting it may fall to near zero by year-end. On top of that, it’s unclear whether Saudi Arabia, the world’s top oil exporter, will follow through on its vow to pump more to make up for losses from other members of the Organization for Petroleum Exporting Countries.

“When the U.S. crude oil warehouses bulge to their highest levels since September 2017, while production continues to set new high-water marks, warning signals should be flashing red,” said Stephen Innes, head of trading at SPI Asset Management. Still, the weakness is likely to be cursory as the focus will shift back to supply risks emanating from Iran and Venezuela, he said.

West Texas Intermediate crude for June delivery declined 29 cents, or 0.5 percent, to $63.31 a barrel on the New York Mercantile Exchange at 7:38 a.m. in London. The contract closed 31 cents lower at $63.60 on Wednesday.

Brent for July settlement fell 0.5 percent to $71.83 a barrel on the London-based ICE Futures Europe Exchange, after closing down 0.9 percent at $72.18 on Wednesday. The global benchmark crude was at a premium of $8.41 to WTI for the same month.

American crude stockpiles jumped by 9.93 million barrels last week, according the EIA data, compared with a 1.75 million barrel increase predicted in a Bloomberg survey. Investors are closely watching growing U.S. production, which rose to 12.3 million barrels a day last week, as it threatens to undermine the OPEC+ coalition’s effort to trim a global glut.

The failure of the uprising against President Maduro in Venezuela, may result in tougher U.S. sanctions that could further squeeze crude shipments from the oil-rich country. It’s “quite conceivable” that Maduro will manage to hang onto power with help from Moscow or that another pro-military candidate will assume power in the near term, preventing a recovery in the oil industry, RBC said in its note dated May 1.

While President Donald Trump has said that Saudi Arabia and other OPEC producers will make up for the lost Iranian barrels, Khalid Al-Falih, the kingdom’s oil minister, said Tuesday that almost all ministers from the group want to extend the current agreement. That deal, aimed at curbing output by 1.2 million barrels per day, will expire in June. Russia missed its OPEC+ target for cutting production in April, according to preliminary data from the nation’s Energy Ministry.

SOURCE: RIGZONE.COM