Oil prices rose on Thursday after US crude and gasoline stockpiles fell, but worries over whether OPEC-led output cuts would be able to rein in a three-year glut continued to drag. The market largely shrugged off comments overnight from Iran’s oil minister that members of the Organization of Petroleum Exporting Countries (OPEC) are considering deeper cuts in production. Brent crude futures were 4 cents higher at $44.86 a barrel at 0219 GMT, after falling 2.6 percent in the previous session to their lowest since August last year.
U.S. crude futures were up 6 cents at $42.59 a barrel. On Wednesday, they settled down at $42.53, after touching their lowest intraday level since August 2016. Since peaking in late February, crude has dropped around 20 percent, with only brief rallies, completely erasing gains at the end of the year in the wake of the initial OPEC-led production cut. OPEC and other producers agreed to cut output by 1.8 million barrels per day from January for six months, subsequently extended for a further nine months.
With production rising in Nigeria and Libya, countries exempt from the deal, and output surging in the United States, which was not part of the agreement, many bulls appear to have thrown in the towel. Oil has “now fallen into ‘bear’ territory,” ANZ said in a research note. “OPEC (and allies) may have pared back production, but that’s being offset by relentless drilling in the U.S. and more output in Libya.” A bigger-than-expected cut in U.S. crude stockpiles reported overnight is barely shifting the dial.
Crude inventories fell 2.5 million barrels in the week to June 16, surpassing analyst expectations for a decrease of 2.1 million barrels, as imports rose marginally by 56,000 barrels per day, the U.S. Energy Information Administration said on Wednesday. Gasoline stocks fell 578,000 barrels, compared with analyst expectations for a seasonally unusual 443,000-barrel gain, which had been seen as bearish in the market. Stocks of the motor fuel had also risen unexpectedly by 2.1 million barrels in the previous week, despite the start of the summer driving season.