Crude prices pull back as US stockpiles rise

NEW YORK — Oil prices pared gains after the settlement Tuesday, as evidence of surging US crude oil stocks underscored concerns that shale production may limit effectiveness of an OPECled effort to cut global output.

Brent crude traded at $55.73 a barrel at 4:39 p.m. Eastern, off the settlement of $ 55.97 a barrel, which was up 38 cents but well off the session high of $56.46 a barrel. US light crude traded at $52.94 a barrel following the inventory report by a trade group, after settling up 27 cents at $53.20.

After settlement, the American Petroleum Institute ( API) said US crude inventories rose 9.9 million barrels in the week to Feb. 10, far exceeding analysts’ expectations for an increase of 3.5 million barrels. Gasoline and diesel stockpiles also rose, the API’s weekly report said.

The US government is scheduled to release its weekly data on stockpiles Wednesday morning.

On Monday, both benchmarks fell 2%. Both are near the middle of $ 5- per- barrel trading ranges seen since early December.

The Organization of the Petroleum Exporting Countries ( OPEC) and other exporters including Russia have agreed to cut crude output by almost 1.8 million barrels per day ( bpd) during the first half of 2017.

The market has largely priced in these production cuts OPEC and other producers agreed to in November, said Tariq Zahir, managing member of Tyche Capital in New York.

“It would take either a supply outage or serious cuts to move it,” he said.

“The first month, obviously, OPEC is going to do the best it can, but after that, let’s see what the second and third month bring.”

Meanwhile, US crude output is up 6.50% since mid- 2016 to 8.98 million bpd, its highest since April last year. On Monday, government data showed US shale oil production for March is expected to rise by the most in five months to 4.87 million bpd.

“Oil just appears to be caught in a range at the moment and mainly focused on those supply considerations,” said Ric Spooner, chief market analyst at CMC Markets in Sydney.

Investors also wonder how long OPEC countries will stick to their agreed production cuts.

“OPEC producers want the market to believe they will stick” to the cuts, said Hans van Cleef, senior energy economist at ABN AMRO Bank in Amsterdam.

“But lessons from the past have made the market deeply suspicious.” —