Oil Dips Ahead of U.S. Stockpiles Data as OPEC Cuts Lose Sizzle

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© Reuters.  © Reuters.

By Barani Krishnan

Investing.com – Move aside, OPEC, ’s back to U.S. crude stockpiles for now.

Oil prices went from more than 1% higher in early Tuesday trade to slip into the negative by early afternoon on worries that U.S. crude inventories may have risen by more than 3 million barrels last week. Concerns about global economic fallout from the festering U.S.-China trade war also weighed on the market after Monday’s brief optimism over extended OPEC production cuts.

, the benchmark for U.S. crude, were down 37 cents, or 0.6%, at $62.84 per barrel by 12:45 ET (16:45 GMT). It rose as much as 68 cents earlier in the session.

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, the global benchmark for oil, were off by 33 cents, or 0.5%, at $71.64. It had risen 33 cents at the day’s high.

“The (Reuters) consensus is that we may have had a 3.2-million-barrel build in U.S. crude last week, and that’s more relevant to immediate market sentiment than any cut that OPEC plans to do over the longer run,” said , founding partner at New York energy hedge fund Again Capital.

At 4:30 PM (20:30 GMT), the will issue a snapshot on what the Energy Information Administration will likely report on Wednesday for oil supply-demand foir the week ended May 17.

If indeed stockpiles rose by more than 3 million barrels last week, it would be the second week in a row for such a substantial growth after the previous week’s rise of nearly 5.5 million barrels.

“The recent trend of builds in the U.S. … are counter-seasonal and (inventories) need to start drawing or people may fear that production in the U.S. is just exploding higher,” Scott Shelton, energy futures broker at ICAP (LON:) in Durham, N.C. said, referring to the upcoming peak U.S. summer driving season where gasoline processing is usually at its highest.

U.S. crude production reached 12.2 million barrels last week, slightly below the all-time high of 12.3 million registered in late April.

Kilduff said one reason for the large crude builds at this time of year could be that refining margins were weaker than year-ago .

“It’s understandable that refiners may want to wait for better margins to ramp up gasoline making,” he said. “In that process, if they allow crude stocks to start building, it’s only going to weaken the flat price of crude and further weigh on refining margins.”

Oil prices have been volatile since Monday on mixed messaging by two of the world’s biggest crude exporters. OPEC’s dominant member Saudi Arabia vowed to maintain its squeeze on production through the end of the year. But the kingdom’s main partner in the extended OPEC+ alliance, Russia, suggested that it would base its output on market conditions, meaning it could relax cuts especially if demand slackened.

Six months of disciplined output cuts by OPEC+ as rising U.S.- and -Saudi tensions of late have shored up oil prices by nearly 40% this year. But the U.S.-China trade war, which is dragging everything from agriculture to technology into it and could hasten the world’s slide into recession, is raising questions about demand.

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Source: Investing.com