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Oil falls below US$63 as US stocks rise, Opec "floods market"
[LONDON] Oil fell to trade further below US$63 a barrel on Wednesday after US crude inventories unexpectedly rose, the latest sign of a supply glut that may increase if Iran reaches a nuclear deal with world powers.
The market also came under pressure from Greece becoming the first developed economy to default on an International Monetary Fund loan and on expectations the nuclear accord, which may allow higher Iranian oil exports, is drawing closer.
Brent crude was down $1.07 at US$62.52 a barrel at 1454 GMT. US crude fell $1.52 to $57.95. Both contracts made gains on Tuesday. "The oil market is being literally flooded with OPEC crude oil at present," said Carsten Fritsch, analyst at Commerzbank.
"If the nuclear negotiations with Iran are brought to a positive conclusion, there is also the 'threat' of additional oil reaching the market from Iran."
World powers and Iran are holding talks in Vienna on Tehran's disputed nuclear programme. A deadline for an agreement has been extended until July 7.
"Greece is an additional risk factor, but I am more focused on Vienna than on Athens right now," said Olivier Jakob, oil analyst at Petromatrix in Zug, Switzerland.
The US government's weekly oil supply report released at 1430 GMT said crude inventories rose by 2.4 million barrels. Analysts had expected a decline.
"It is a slightly bearish report due to the decent-sized crude oil inventory build, both overall and at the Cushing, Oklahoma, delivery point," said John Kilduff, partner at Again Capital LLC in New York.
The official stocks data largely confirmed a report on Tuesday from industry group the American Petroleum Institute, which said crude stocks increased by 1.9 million barrels and had pressured prices earlier in the session.
The dollar gained in response to the latest developments in Greece's debt crisis. A stronger dollar makes commodities more expensive for holders of other currencies and tends to weigh on oil prices.
Besides US inventories, a jump in production by the Organization of the Petroleum Exporting Countries (Opec) also weighed on prices.
Opec supply rose to a three-year high of 31.60 million barrels per day in June, according to a Reuters survey on Tuesday, led by record Iraqi exports. "With these strong growth rates, Opec supply growth is now challenging non-Opec supply growth," analysts at JBC Energy in Vienna wrote. "The uptick comes on the back of a massive increase in Iraqi production."