Oil slipped further below $56 a barrel on Wednesday as an industry report showing a large rise in U.S. crude inventories signaled ample supply, even as OPEC achieves record compliance with its supply-cut accord.
U.S. inventories rose by a larger-than-expected 9.9 million barrels last week, the American Petroleum Institute trade group said on Tuesday, ahead of the Energy Information Administration’s official supply report.
“Should this figure be confirmed by the EIA later today, U.S. crude stocks will have risen to a fresh record high,” said Stephen Brennock of oil broker PVM.
Brent crude was down 34 cents at $55.63 by 0949 GMT, half its level of mid-2014, when a global glut started a collapse in prices. U.S. crude fell 39 cents to $52.81.
To support prices, the Organization of the Petroleum Exporting Countries and other producers including Russia are cutting output by almost 1.8 million barrels per day in the first half of 2017.
Although OPEC has made a strong start in complying with the cuts, rising U.S. stocks and a revival of U.S. oil output have limited the price rise.
Analysts expect U.S. crude inventories to have risen by 3.5 million barrels, the sixth straight week of gains, in the EIA report scheduled to be released at 1530 GMT.
OPEC in January delivered record compliance of over 90 percent with its output curbs, according to estimates from the International Energy Agency and figures collected by OPEC’s headquarters.
Within OPEC, adherence is mixed. Top exporter Saudi Arabia, keen to make the deal work, said it cut output by more than the amount called for by the agreement.
BMI Research, in a report, said a compliance rate of just 40 percent by Iraq, OPEC’s second-biggest producer, “could prove problematic to group cohesion” as others will have to go beyond their targets to meet the overall goal.
Russia and the other non-OPEC producers have so far delivered smaller cutbacks. The oil minister of Oman, one of the participating non-OPEC countries, said he expected Russia’s compliance to be better in February and March.
“Russia told us since the beginning the cut will take some time,” Mohammad bin Hamad al-Rumhy told reporters in Kuwait.
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson) source