Oil Pares Loss as Industry Report Said to Show Supply Drop

Updated on
  • Crude supplies declined by 5.79 million barrels last week: API
  • Libya’s output rises to 796,000 barrels a day: NOC chairman

Crude futures pared losses in New York after a U.S. industry report was said to show an inventory decline.

The American Petroleum Institute said that American crude supplies shrank by 5.79 million barrels last week, people familiar with the data said Tuesday. The Energy Information Administration is forecast to report on Wednesday that stockpiles fell by 2 million barrels, according to a Bloomberg survey. Futures dropped earlier as Libyan output rose to the highest in more than two years, getting in the way of OPEC’s efforts to drain a global glut.

Oil capped a third weekly decline on Friday after dropping to levels last seen before the Organization of Petroleum Exporting Countries agreed in November to reduce output. While Goldman Sachs Group Inc. and Citigroup Inc. see the market tightening and say the recent selloff wasn’t based on fundamentals, concerns remain about the pace of rising U.S. supply. Futures edged higher Monday as Saudi Arabia and Russia sought to reassure the market.

"Libyan production is racing back, adding a significant slug of oil to the market, which will be difficult to incorporate," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "OPEC threw everything at the market yesterday and prices barely moved. There are real doubts about the effectiveness of the accord."

West Texas Intermediate for June delivery fell 55 cents to close at $45.88 a barrel on the New York Mercantile Exchange. Total volume traded was about 14 percent above the 100-day average. Futures traded at $46.25 at 4:39 p.m. after the release of the API data.

Michael Cohen, head of energy commodities research at Barclays Bank PLC, examines the factors driving oil prices

Daybreak: Americas." (Source: Bloomberg)

Brent for July settlement slipped 61 cents, or 1.2 percent, to $48.73 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.46 premium to July WTI.

Libya’s output has reached 796,000 barrels a day, Mustafa Sanalla, the chairman of state producer National Oil Corp., said Monday.

See also: U.S. Crude Output Seen Rising to Record in 2018

In separate statements just hours apart on Monday, Saudi Arabia and Russia, the world’s largest crude producers said publicly for the first time they would consider prolonging their output reductions for longer than the six-month extension widely expected to be agreed at the OPEC meeting on May 25.

Projected Decline

U.S. crude stockpiles probably fell by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. Gasoline supplies are projected to have increased, while inventories of distillate fuel are seen dropping, the survey showed.

"The Libya headlines are weighing on prices," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. "The market is extremely cautious after getting creamed last week. People will be cautious about loading up ahead of the storage report."

Oil-market news:

  • Commodities investors needn’t fear the Federal Reserve. Raw materials perform best when the U.S. central bank is hiking rates, according to Goldman Sachs Group Inc.
  • Nigeria’s Forcados oil pipeline is fixed and ready to resume exports, according to people with direct knowledge of matter.
  • Cost of producing oil at a standard field in Iran is around $7 a barrel, rising to $10 and $15 for fields that require improved recovery methods, Iran oil ministry news agency Shana reported, citing Gholam-Reza Manouchehri, deputy director of state-run NIOC.
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