Oil held above $63 a barrel on cautious optimism that the market will re-balance as OPEC production falls, while investors keep a wary eye on US supplies.
Futures in New York slipped 0.4% after climbing 0.8% on Tuesday. Output from the Organisation of Petroleum Exporting Countries dropped to the lowest in a year in March. In the US, where supplies have threatened to undermine OPEC’s curbs, an industry report said inventories slid last week. Still, government data due on Wednesday is forecast to show stockpiles rose for the fifth time in six weeks.
While the UAE’s energy minister says efforts by OPEC and its allies have removed “85% of the problem” of oversupply, surging American production continues to remain a thorn for the group.
Even after crude was propped up in February by rising geopolitical risks surrounding the US and Middle East producer Iran, it’s still struggling to recover to the highs of January, with concerns over a global trade war also weighing on prices.
“OPEC’s production cuts are working and we are seeing a steady decrease in a global supply glut,” Ahn Yea Ha, a commodities analyst at Kiwoom Securities, said by phone. “While increasing US supplies weigh on prices, we’re seeing nice demand from both in and out of America, which eases concerns over bloated inventories.”
West Texas Intermediate for May delivery was $63.28 a barrel on the New York Mercantile Exchange, down 23 cents, at 08:35. The contract rose 50c to $63.51 on Tuesday. Total volume traded was about 53% below the 100-day average.
Brent for June settlement lost 25c to $67.87 a barrel on the London-based ICE Futures Europe exchange. The contract added 48 cents to $68.12 on Tuesday. The global benchmark crude traded at a $4.63 premium to June WTI.
Yuan-denominated oil futures on the Shanghai International Energy Exchange were little changed at 402.3 yuan a barrel after the September-delivery contract closed 3.4% lower on Tuesday.
Output from the 14 members of OPEC dropped to 32.04 million barrels a day in March, the lowest since last April, according to a Bloomberg News survey.
With the group reaching an unprecedented degree of compliance with its current output target, Venezuela contributed to a further decline in supplies in March. Production in the Latin American nation fell by 100 000 barrels from February to 1.51 million barrels a day, the survey showed.
