Oil prices fell 1 percent on Wednesday after data showed an increase in U.S. crude inventories, stoking concerns that markets remain oversupplied despite efforts by top producers Saudi Arabia and Russia to cut output.Brent crude futures were down 53 cents, or 1 percent, from their last close at $51.13 per barrel at 0028 GMT. U.S. West Texas Intermediate (WTI) crude futures were at $48.10, down 57 cents, or 1.1 percent, from their last settlement.U.S. crude oil inventories rose by 882,000 barrels in the week ending May 12 to 523.4 million, compared with analyst expectations for a decrease of 2.4 million barrels, data from industry group the American Petroleum Institute showed on Tuesday.
“The rally in crude oil prices that started after news that OPEC was ready to prolong its production cut agreement stalled overnight, as the market awaits evidence of rebalancing,” ANZ bank said on Wednesday.The fall in prices came just days after Saudi Arabia and Russia said on Monday that they agreed the need for a 1.8 million barrels per day (bpd) crude supply cut by the Organization of the Petroleum Exporting Countries (OPEC) and some other producers including Russia to be extended for nine months, until the end of March 2018.
The extension of the supply cuts, which started in January and were supposed to end in June, are seen as necessary by some as they have not so far significantly tightened the market or propped up prices.The International Energy Agency (IEA) said on Tuesday that commercial oil inventories in industrialised countries rose by 24.1 million barrels in the first quarter of the year, a time during which the OPEC-led production cut was already in place.Despite this, analysts said that an extension of the supply cut was important.
“The agreement by OPEC to extend cuts into 2018 is critical,” said AB Bernstein in a note.”OPEC cuts will nevertheless lead to accelerated inventory drawdowns in 2H17, but the return to normalized inventories will … drag into 2018,” it added.