OIL prices fell for the second consecutive session on Wednesday as the dollar strengthened and government data showed a surprise jump in US crude and petrol stocks.
Brent crude futures for May shed 16 cents, or 0.2 per cent, to settle at US$86.09 a barrel while the more actively traded June contract was down 22 cents to US$85.41. The May contract expires on Thursday.
US West Texas Intermediate (WTI) crude futures for May delivery dropped 27 cents, or 0.3 per cent, to US$81.35 a barrel. Both Brent and WTI futures have been under selling pressure since hitting more than four-month highs last week.
A stronger US dollar weighed on oil, with the US dollar index gaining for a second consecutive session. A rising US currency makes dollar-denominated oil more expensive for holders of other currencies, dampening demand.
A surprise jump in US crude and petrol stockpiles also added to the pressure on oil prices, analysts said. US crude oil stocks rose by 3.2 million barrels while petrol stocks rose by 1.3 million barrels in the week ended March 22, according to data from the Energy Information Administration (EIA).
Analysts polled by Reuters expected crude stocks to decline by 1.3 million barrels and petrol stocks to drop by 1.7 million barrels.
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Petrol demand fell for a second straight week to 8.7 million barrels per day (bpd), down from 8.8 million bpd in the prior week, EIA data showed.
“Considering the fact that we’re only making crude oil to make petrol basically, that is a bearish development,” said Robert Yawger, director of energy futures at Mizuho.
The Organization of the Petroleum Exporting Countries (Opec) and allies led by Russia, together known as Opec+, are unlikely to change oil output policy until a full ministerial gathering in June, three Opec+ sources told Reuters ahead of next week’s meeting to review the market and members’ implementation of output cuts.
Opec+ this month agreed to extend output cuts of about 2.2 million bpd to the end of June, although Russia and Iraq have had to go to extra lengths to tackle over-production.
Those struggles have called into question the group’s ability to comply with the agreed cuts, with Opec having exceeded its targets by 190,000 bpd in February, a Reuters survey showed.
“The Opec+ production cuts have sparked debate over volumes, particularly concerning Iraq’s overproduction over the past two months,” said Alex Hodes, energy analyst at StoneX.
“Another pivotal point is Russia’s potential volume reduction,” Hodes said. “Monitoring Russian oil flows in the upcoming quarter will be crucial for market observers,” he added. REUTERS
