Oil pulls back on low US gasoline inventory draw

NEW YORK — Oil prices retreated slightly Wednesday as investors reacted to a smaller-thanexpected US gasoline stocks draw as they awaited the outcome of discussions in Vienna between the Organization of the Petroleum Exporting Countries (OPEC) and other oil-exporting countries on whether to extend output cuts.

US crude oil inventories fell for the seventh straight week as refiners processed a near-record amount of crude last week, the Energy Information Administration said on Wednesday, even as gasoline and distillate stocks also dipped.

Crude inventories fell 4.4 million barrels in the week ended May 19, more than analysts’ forecasts of a 2.4 million barrels decline. Gasoline inventories fell only 787,000 barrels, compared with expectations for a 1.2 million barrel draw.

The data comes one day before the OPEC, along with nonmember producing nations, are scheduled to decide whether to extend an agreement to cut world supply, an effort that has only recently started to bear fruit in global inventory figures.

Benchmark Brent crude oil settled down 19 cents a barrel at $53.96. US light crude was down 11 cents at $51.36.

Both benchmarks have gained more than 10% from their May lows below $50 a barrel, rebounding on a consensus that OPEC and other producers will maintain strict limits on production in an attempt to drain persistent global oversupply.

Having cleared this week’s US data, the focus now shifts to the outcome of the OPEC meeting tomorrow, said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.

“While consensus is growing on extending the cap by another nine months, a deeper cut is unlikely,” Mr. Kumar said.

OPEC has promised to cut supplies by about 1.8 million barrels per day ( bpd) until June and was expected on Thursday to extend that cut as long as nine months.

A multination ministerial committee consisting of some key OPEC and non- OPEC members recommended on Wednesday keeping the cuts at the same level when producers meet the following day, according to an OPEC source.

“A nine- month extension of the production cuts agreed six months ago is meanwhile regarded as a done deal,” Commerzbank said in a note.

“After all, OPEC’s target of bringing global stocks back to the five-year average level is still far from achieved.”

The OPEC- led cuts would only result in a balanced market this year, BMI Research said, but from 2018 onward, markets would return to oversupply, albeit at a lower level than 20132016.

One reason markets have not tightened more has been rising US oil production, which has soared 10% since mid-2016 to 9.3 million bpd.