(Bloomberg) -- Oil retreated from a five-month high as an increase in U.S. crude inventories to the highest since late 2017 overshadowed OPEC’s efforts to reduce production.
Futures fell as much as 0.8 percent in New York after climbing 1 percent Wednesday. American crude inventories rose by 7.03 million barrels last week, Energy Information Administration data showed. That may undermine Saudi Arabian-led efforts to curb a glut, with OPEC saying in its monthly report that production tumbled by 534,000 barrels a day last month to around 30 million.
Output cuts by the Organization of the Petroleum Exporting Countries and its allies have propelled crude’s 42 percent surge this year, with supply disruptions from Libya to Venezuela adding impetus. While the OPEC report points to a much tighter market in coming months, higher prices may incentivize more American shale production.
“While there’s still room for oil to edge higher and temporarily reach $65 a barrel, a new psychological level, the bullishness will then prompt American drillers to boost production, said Kim Kwangrae, a commodities analyst at Samsung Futures Inc. in Seoul. It’s becoming harder for oil to keep rallying as its already gained so much this year, he said.
West Texas Intermediate for May delivery fell 49 cents, or 0.8 percent, to $64.12 a barrel on the New York Mercantile Exchange as of 8:36 a.m. in London. It finished up 63 cents at $64.61 on Wednesday, the highest closing level since Oct. 31.
Brent for June settlement declined 44 cents to $71.29 a barrel on the London-based ICE Futures Europe exchange. The contract climbed 1.6 percent to settle at $71.73 on Wednesday, the highest close since Nov. 7. The global benchmark crude was at a premium of $7.13 to WTI for the same month.
U.S. crude stockpiles expanded by more than double what analysts had forecast to 456.6 million barrels, well above the five-year average, EIA data showed. This suggests American output, which held at a record 12.2 million barrels a day last week, may still add to a global glut.
OPEC’s production -- at 30.022 million barrels a day -- is about 758,000 barrels a day below the average amount the group believes is needed during the second quarter. The plunge last month was amplified by the crisis in Venezuela and if output remains at current levels, global inventories will decline sharply this quarter and next, it said.
--With assistance from James Thornhill.To contact the reporter on this story: Heesu Lee in Seoul at email@example.com To contact the editors responsible for this story: Pratish Narayanan at firstname.lastname@example.org Andrew Janes, Ovais Subhani
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