Oil prices rise ahead of US crude stocks data

Oil prices up in choppy trading

Oil prices rose slightly in seesaw trading on Tuesday as analysts weighed an expected drop in US crude stocks against doubts about the success of the OPEC supply cut deal.

Brent crude was up 50 cents to $52.10/barrel at 1:17 p.m. EST and US crude futures were up 33 cents to $49.56/barrel.

Analysts polled ahead of the release of data on crude stocks by American Petroleum Institute (API) and the US Energy Information Administration (EIA), anticipate data will show inventories fell by 1.6 million barrels last week.

If the analysts are correct, this would mean US crude stocks will have fallen for three consecutive weeks.

API data will be released at 4:30 p.m. EDT and the EIA will release its data on Wednesday morning.

Despite strong compliance by participants in the OPEC supply cut deal, Brent is down about 5 per cent since early December when the pact was announced.

The global oil oversupply remains and stocks are at record highs.  On Tuesday, Stephen Schork of the Schork Report said “OPEC has failed miserably in its endeavour to balance the oil market.”

Speaking with Reuters, Matt Smith, director of commodity research at ClipperData said global crude loadings are at record levels.

“We still see that continue to tick higher,” Smith said. “Until we see the loadings drop, until we see the oil on the water falling, we are unlikely to see the market materially moving towards rebalancing.”

On Monday, Russia said its oil output could reach its highest level in 30 years if OPEC and non-OPEC producers do not extend the supply reduction deal into the second half of the year.

The next day, Russia’s Deputy Prime Minister Arkady Dvokovich was quoted by Interfax as saying Russia could increase its oil production if it believes prices are unlikely to fall as a result.

JPMorgan said to successfully reduce the current crude glut, OPEC “will be forced to renew, and possibly deepen the agreement if they wish to keep prices much above $50 per barrel.”

Smith argues that with the May 25 OPEC meeting looming, there will be a lot of posturing by OPEC and non-OPEC producers.

 

“We have a month before the meeting in Vienna,” he said, “Between now and then we’re going to get a lot of contrasting rhetoric.”

Another analyst, Bjarne Schieldrop, commodities strategist with SEB told Reuters the current climate will be uncertain until the May 25 meeting. “It doesn’t make sense to sell down to $45 ahead of that,” he said.