Oil prices fall on rise in US inventories, Russia supply remarks

Mr Igor Sechin, head of Russian oil giant Rosneft, said on Tuesday that Russia should pump at will.
Mr Igor Sechin, head of Russian oil giant Rosneft, said on Tuesday that Russia should pump at will.

TOKYO • Oil prices resumed their slide yesterday, dragged down by an unexpected gain in US inventories and comments from the head of Russian state oil producer Rosneft questioning the point of a deal with Opec to withhold supplies.

Brent futures were down 42 US cents, or 0.7 per cent, at US$61.55 a barrel by 0552 GMT. They rose 1.1 per cent on Tuesday after a near 13 per cent fall in the previous four sessions.

US West Texas Intermediate crude was down by 48 US cents, or 0.9 per cent, at US$53 a barrel. The US benchmark closed 0.4 per cent higher on Tuesday.

Oil prices have fallen sharply on fears over slowing global demand, but won a respite on Tuesday after a global stock market rally on hopes of a cut in United States interest rates.

US crude stocks rose unexpectedly last week, while petrol and distillate inventories built more than expected, industry group American Petroleum Institute said on Tuesday.

Crude inventories rose by 3.5 million barrels in the week to May 31 to 478 million, compared with analysts' expectations for a decrease of 849,000 barrels.

Official numbers from the US Energy Information Administration (EIA) are due out soon.

"It was a very bearish number and, if confirmed by the EIA, it will hammer prices," said Mr Stephen Innes, managing partner at SPI Asset Management in Bangkok.

The oil market has been weighed down by concerns over slowing global growth from the US-China trade war and US President Donald Trump's threats last week to place tariffs on Mexican imports.

To prevent oversupply and prop up the market, the Organisation of the Petroleum Exporting Countries (Opec), together with allies including Russia, has been withholding production since the start of the year.

The group plans to decide later this month or early next month whether to continue the supply curbs.

"The decision is always dependent on price, and with oil markets trading at the lower end of the market broader range, I think it's a lock, especially with the multitude of uncertainties on the macro front," Mr Innes said.

Underlining concerns about oversupply, Mr Igor Sechin, head of oil giant Rosneft, said on Tuesday that Russia should pump at will and he would seek compensation from the government if cuts were extended.

Russia's average daily oil output has nonetheless dropped to a three-year low after contaminated crude clogged its main export route.

Further pressuring oil prices and undermining Opec's efforts to tighten the market has been surging US output to record highs, leading to more of its crude being exported.

REUTERS

A version of this article appeared in the print edition of The Straits Times on June 06, 2019, with the headline 'Oil prices fall on rise in US inventories, Russia supply remarks'. Print Edition | Subscribe