Oil falls 1pc as US crude inventories surge
Oil prices fell for a second day, dropping more than 1% on Wednesday on surging US stockpiles and signs that the OPEC+ producer group is unlikely to change its output policy at a technical meeting next week.
Brent crude futures for May dropped 97 cents, or 1.12%, to $85.28 a barrel by 0929 GMT while the more actively traded June contract fell by 92 cents, or 1.07%, to $84.71.
The May contract expires on Thursday. US West Texas Intermediate (WTI) crude futures for May delivery fell 93 cents, or 1.14%, to $80.69. Prices have retreated since climbing to their highest since October last week and remain about 3% above the average closing price in the first week of March.
A sharp rise in US crude inventories and expectations for potential inaction by OPEC+ next week prompted further “unwinding” in oil prices as profit-taking accelerates after the midMarch rally, said IG market strategist Jun Rong Yeap.
US crude oil inventories rose by 9.3 million barrels in the week ended March 22, said market sources citing American Petroleum Institute figures on Tuesday. Distillate inventories rose by 531,000 barrels, but gasoline stocks dropped by 4.4 million barrels. Official government data will be published on Wednesday at 10:30 a.m. EDT (1430 GMT).
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+, are unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters ahead of next week’s meeting to review the market and members’ implementation of output cuts.
Oil steadies as markets weigh
Russian supply woes
OPEC+ this month agreed to extend output cuts of about 2.2 million barrels per day (bpd) to the end of June, though Russia and Iraq have had to go to extra lengths to tackle overproduction.
Those struggles have called into question the group’s ability to comply with cuts, with OPEC having exceeded its targets by 190,000 bpd in February, a Reuters survey showed.
Traders are “watching OPEC members for any sign they may be altering their stance on production quotas,” ANZ analysts said in a report on Wednesday.
Meanwhile, leading German economic institutes said they expect the country’s economy to grow by 0.1% in 2024, down from a previous forecast of 1.3%, in a grim sign for Europe’s economic powerhouse.
India’s top refiner Indian Oil Corp will consider resumption of Venezuelan oil purchases if the US continues with a relaxation in sanctions against the OPEC-producer, the Indian company’s chairman said on Tuesday.
IOC is scheduled to get a cargo of Venezuelan oil next month, according LSEG trade flow.
The refiner also got a parcel of Venezuelan oil last month.
“We will consider buying Venezuelan oil if the relief provided now stays and if Venezuelan crude makes commercial sense for us,” Shrikant Madhav Vaidya told Reuters.
The US last year relaxed sanctions on Venezuela’s oil industry until April 18 in return for promises to open its presidential election to international observers and the opposition’s preferred candidate, something that hasn’t happened.
LSEG data shows that Indian refinersIOC and Reliance Industries Ltd are not lifting Venezuelan oil in April.
If a license granted in October easing the sanctions is not renewed next month, state oil company PDVSA would probably return to using intermediaries to sell its oil to buyers such as China, likely at discounts.
India previously halted import of Venezuelan oil in 2020 after the US imposed sanctions, and resumed purchases only last year after Washington eased restriction on the South American nation’s oil sector for six months.
Indian state retailers’ gasoline and diesel sales fell in the first half of August from the previous month and a year ago, preliminary sales data showed on Wednesday, as industrial activity and mobility was hit due to monsoon rains.
Fuel demand in India, the world’s third-biggest oil importer and consumer, typically falls during the fourmonth monsoon season beginning in June as parts of the country are affected by heavy floods.
State retailers sold 1.19 million metric tons of gasoline in the first half of August, down 5.2% from the same period in July and by 8% from a year earlier, the data showed.
Gasoline, also called petrol, is primarily used in passenger vehicles.
Sale of diesel, mainly used by trucks and other commercial vehicles, dipped by 9.5% from the previous month and 5.7% from a year ago to about 2.68 million tons in the first half of August, the data showed.
Monsoon rains also hit demand from the agriculture sector as farmers use gasoil-fired generators for irrigation.
Diesel sales of state fuel retailers were also affected due to marginally lower prices of the fuel at outlets of private refiners.