Oil falls below US$74 on US inventories, Opec supply

London

OIL slipped below US$74 a barrel on Wednesday pressured by an industry report that US stockpiles of crude rose unexpectedly and by higher production from the Organization of the Petroleum Exporting Countries (Opec), adding to indications of more ample supply.

On Tuesday, the American Petroleum Institute said crude inventories rose by 5.6 million barrels last week. Analysts had expected a decrease of 2.8 million. The US government's supply report is due on Wednesday.

Brent crude, the global benchmark, dropped 40 cents to US$73.81 a barrel on Wednesday, adding to a 1.8 per cent loss in the previous session. US crude was down 44 cents at $68.32.

"A fresh dose of price angst has come from an unexpected source," said Stephen Brennock of oil broker PVM. "The US has been flying the flag for the drawdown in global oil stockpiles, yet the rebalancing paused abruptly last week," he said, referring to the API report.

Last month, Brent fell more than 6 per cent and US crude slumped about 7 per cent, the biggest monthly declines for both benchmarks since July 2016.

Oil also slipped on more ample supplies.

Opec, plus Russia and other allies, decided in June to ease supply cuts that had been in place since 2017 after a glut was cleared.

Opec production rose in June, led by Saudi Arabia, and reached a 2018 high in July, a Reuters survey found on Monday, although declines from Iran and other producers limited the increase.

Kuwait confirmed on Wednesday it had also increased production in July. Output is currently 2.8 million barrels per day, its oil minister said on Wednesday, an increase of 100,000 bpd from June's average.

"Strong upticks from key Opec members in July helped push group production up significantly versus June," analysts at JBC Energy said in a report.

Signs that a supply disruption in the Bab al-Mandeb Strait in the Red Sea could be resolved weighed on prices.

Yemen's Houthi group said it was ready to halt attacks in the Red Sea to support peace efforts. Saudi Arabia had suspended oil shipments through the strait last week after attacks on tankers.

Concerns over slowing economic growth because of a trade dispute between the US and China are also putting downward pressure on the market. REUTERS