© Reuters. FILE PHOTO: Pump jacks operate at sunset in an oilfield in Texas
By Henning Gloystein
SINGAPORE (Reuters) – Oil prices dipped on Thursday, extending bigger falls from the previous session, as surging inventories and weak demand from refineries weighed on markets.
However, oil markets still remain relatively well supported by supply cuts led by the OPEC producer cartel and by political tension in the Middle East.
futures, the international benchmark for oil prices, were at $70.90 per barrel at 0007 GMT, down 9 cents, or 0.1 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were down by 3 cents at $61.39 per barrel.
Crude futures fell by around 2 percent the previous day.
“Rising inventories and a slowdown with refined product demand could suggest we could see further pressure (on prices),” said Edward Moya, senior analyst at futures brokerage OANDA.
U.S. crude oil inventories rose last week, hitting their highest levels since July 2017, due to weak refinery demand, the Energy Information Administration said on Wednesday.
Commercial U.S. crude oil inventories rose by 4.7 million barrels in the week ended May 17, to 476.8 million barrels, their highest since July 2017, the EIA data showed.
Beyond weak refinery demand for feedstock crude oil, the increase in commercial inventories also came on the back of planned sales of U.S. strategic petroleum reserves (SPR) into the commercial market.
U.S. crude oil production rose by 100,000 barrels per day (bpd), to 12.2 million bpd, putting output near its record of 12.3 million bpd reached late last month.
(GRAPHIC: U.S. oil drilling, production & storage levels – https://tmsnrt.rs/2DxgF8W)
Ole Hansen, head of commodity strategy at Saxo Bank, said “concerns about slowing (oil) demand growth due to the negative impact on the global economy of the U.S.–China trade war” were also weighing on oil prices.
Countering these bearish price factors have been escalating political tensions between the United States and Iran, as well as ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) that started in January in an effort to prop up the market.
“Large but opposing forces have kept Brent in a $70-$75 per barrel range in recent weeks,” Morgan Stanley (NYSE:) said in a note on oil markets published this week.
“Macro economic data has rapidly deteriorated, and this is reflected in weaker oil demand. At the same time, downside risk to supply is materializing in key countries,” which the U.S. bank said would add to OPEC’s supply cuts.
“On balance, however, we still see tightness in 2H19,” Morgan Stanley said, adding it expected Brent to trade in the $75-$80 per barrel range in the second half of 2019.