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Oil prices steady, US inventories counter supply concern
[LONDON] Oil prices steadied on Thursday as another steep rise in U.S. crude inventories balanced concerns over the security of Middle East supplies as a civil war escalated in Yemen.
Saudi-led coalition warplanes bombed Yemen again on Thursday despite an announcement by Riyadh that it was ending its campaign of air strikes.
Yemen is a tiny oil producer but the Bab el-Mandeb Strait on its southern coast controls access to the Red Sea, Suez Canal and the ports of western Saudi Arabia, the world's biggest exporter of crude oil.
Brent crude for June was up 5 cents at US$62.78 a barrel by 1105 GMT. US crude for June was 10 cents lower at US$56.06 a barrel.
Oil prices have risen as much as US$10 this month due to concerns over potential disruption to Middle East supplies as well as signs of stronger global demand.
But some investors argue the oil price is now too high.
"We think that the latest sharp price increase was mainly speculative-driven," Carsten Fritsch, senior oil analyst at Commerzbank, told Reuters Global Oil Forum.
"The global oil market is still heavily oversupplied. We think that prices will correct sooner rather than later."
US government data showed on Wednesday crude stockpiles rose by 5.3 million barrels last week, well above a forecast 2.9 million barrels, to a record 489 million barrels.
It was the 15th consecutive weekly build for US crude stocks and pushed US commercial inventories almost 100 million barrels above their level a year ago.
The US Energy Information Administration also said domestic oil production had stalled, falling for its third weekly decline in four.
Analysts said US output had not fallen significantly, despite a lower number of rigs drilling for oil.
"We still see a fundamental excess of crude supplies persisting, at least for the next few months," analysts at BNP Paribas said in a note, pointing to little prospect for significant increases in crude demand amid already high refinery run rates.
Executives at an industry conference in Houston this week said the cost of drilling wells in the United States had fallen much faster than expected, allowing producers to work oilfields that just months ago looked uncompetitive.