Oil prices dip below US$62 on US stock build

[LONDON] Oil prices dipped under US$62 a barrel on Wednesday after industry group data showed a higher-than-expected build of 5.5 million barrels in US inventories of crude oil.

Brent for June delivery was down 31 cents at US$61.77 a barrel by 0907 GMT.

US crude for June delivery was 54 cents lower at US$56.07 a barrel.

Data released on Tuesday by industry group the American Petroleum Institute (API) showed that US crude inventories rose by 5.5 million barrels last week, higher than the 2.9 million barrel build expected by analysts in a Reuters survey.

Stocks at the key delivery point of Cushing, Oklahoma, rose by 572,000 barrels, said the API. Energy markets intelligence firm Genscape said on Tuesday that tanks at Cushing were running nearly 80 per cent full.

"You have a considerable build in the US," said Olivier Jakob, chief analyst at Swiss-based consultancy Petromatrix.

"There has been a lot of waiting and hoping for the first drop of stocks in Cushing and that has not happened yet," he said.

Official US stocks data will be issued by the government's Energy Information Administration (EIA) at 1430 GMT on Wednesday.

Saudi Arabia said on Tuesday it was ending a month-long military campaign against the Houthi rebels who seized large areas of Yemen, bringing hope of a political solution to the conflict in the key oil-producing region.

Oil prices had gained nearly US$10 a barrel this month on tensions in the Middle East and concerns over slowing output growth in the United States, before starting to drop back.

Prices are unlikely to plumb new depths this year, however, leading commodity traders said on Tuesday, citing strengthening demand.

"We will probably see one more dip in the second quarter but prices probably won't go below this year's lows," said Ian Taylor, head of the world's top oil trader, Vitol.

"The world has been focused for the last six months on destroying supply," said Executive Chairman Gary Ross of the PIRA Energy Group consultancy in an interview.

"Increasingly the mindset is going to change. They'll have to start thinking about creating supply again, and that's going to mean a lot higher prices than today," he said.

REUTERS