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Oil little changed as growing US supply offsets bullish Saudi comments
[NEW YORK] Oil prices ended little changed on Tuesday, as growing US production expectations offset earlier gains after Saudi Arabia's oil minister said market fundamentals were improving.
The market, however, fell in post-settlement trade after data from industry group the American Petroleum Institute showed US crude stocks last week rose 11.6 million barrels, or more than five times analysts' forecast.
If the build is confirmed by the US Energy Information Administration (EIA) at 10.30am EST (1530 GMT) on Wednesday, it would be the ninth straight weekly rise in inventories that are already at record highs.
At the CERAWeek energy conference in Houston, Saudi Oil Minister Khalid Al-Falih said last year's agreement by Opec and non-Opec countries to curb supplies and boost prices has improved oil market supply and demand fundamentals.
But Mr Falih said that happened only because Saudi Arabia cut beyond what it pledged, bringing the kingdom's output below 10 million barrels per day (bpd). He also said the Organization for the Petroleum Exporting Countries (Opec) would not let rival producers take advantage of the cuts to underwrite their own production investments.
The group is expected to meet again in May, when it could consider extending the production cuts.
Brent futures slipped nine cents, or 0.2 per cent, to settle at US$55.92 a barrel, while US West Texas Intermediate (WTI) crude lost six cents, or 0.1 per cent, to settle at US$53.14.
Both benchmarks were about 0.7 per cent lower after the API data.
Oil prices have been stuck in a US$3 band since February, failing to take off after Opec implemented, to a surprisingly high degree, the first production cut in eight years.
Prices came under pressure as US shale oil drilling increased after WTI rose firmly above US$50 a barrel in December after Opec sealed the deal with Russia and other non-Opec producers.
"Opec has unrealistic expectation as to what their production cuts can achieve," said Phil Davis, managing partner at PSW Investments in Woodland Park, New Jersey, noting US production over the next two years is expected to wipe out much of the Opec cuts.
The EIA projected U.S. oil production would rise to an average of 9.2 million bpd in 2017 and 9.7 million bpd in 2018, which, if correct, would top the current record high of 9.6 million bpd set in 1970.
Fund managers have doubled their net long positions in Brent, WTI and options to 951 million barrels between the start of November and Feb. 21, betting Opec's output cuts would lift prices.
But that bullish sentiment has wavered with Russia's lackluster participation in the cuts, rising US shale output and signs Opec countries began increasing crude exports in February.
Russia promised to implement its 300,000 bpd share of production cuts by the end of April. But brokerage Marex Spectron predicted Russian production and exports would rise gradually, which would lead to "a quick deterioration of the short-term supply conditions."