Oil prices fall on surprise US stocks rise, Russia supply comments

Oil prices have fallen sharply on fears about slowing global demand, but won a respite after a global stock market rally on hopes of a cut in US interest rates on June 4, 2019.
Oil prices have fallen sharply on fears about slowing global demand, but won a respite after a global stock market rally on hopes of a cut in US interest rates on June 4, 2019.PHOTO: AFP

TOKYO (REUTERS) - Oil prices resumed their slide on Wednesday (June 5), 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 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 (WTI) crude was down by 48 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 about slowing global demand, but won a respite on Tuesday after a global stock market rally on hopes of a cut in US interest rates.

US crude stocks rose unexpectedly last week, while gasoline and distillate inventories built more than expected, industry group the 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 later on Wednesday.

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

 

The oil market has been weighed down by concerns about slowing global growth from the US-Sino trade war and 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 in early July 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," Innes said.

Underlining concerns about oversupply, on Tuesday the head of oil giant Rosneft, Igor Sechin, said 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.