By Henning Gloystein | SINGAPORE
Oil prices dipped on Thursday on the back of rising U.S. crude inventories and plentiful supplies, despite emerging output cuts from OPEC and other producers.
Prices for Brent crude futures LCOc1, the international benchmark for oil prices, were at $55.06 a barrel, down 4 cents.
Traders said that a crude oil inventory report published by the U.S. Energy Information Administration late on Wednesday implied ongoing oversupply as inventories unexpectedly rose by 4.1 million barrels to 483.11 million barrel.
However, record U.S. refinery runs of 17.1 million barrels per day (bpd), up 418,000 bpd on the week, indicated strong demand, preventing bigger price falls.
“EIA data showed U.S. refineries increased the amount of crude they processed, pushing the utilization rate to the highest since September. This saw inventories rise … much more than the market expected,” ANZ bank said.
Outside the United States, emerging detail of Saudi supply cuts as parts of efforts by the Organization of the Petroleum Exporting Countries (OPEC) and other producers like Russia to curb the global supply glut started to emerge.
Despite some February supply reductions to China, India and Malaysia, top crude exporter Saudi Arabia is likely to focus its cuts on Europe and the United States, shielding its biggest customers in Asia.
BMI Research said that overall “compliance to the OPEC/non-OPEC oil production cut appears to be positive… (and that) we calculate compliance with production cuts at around 73 percent.”
The research firm said that compliance with the planned cuts was particularly strong among members of the Gulf Cooperation Council of Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Bahrain and Oman.
Analysts noted that one aspect of the coordinated production cut which has been overlooked is that under the deal, producers have committed themselves to reducing output, not necessarily exports.
“The GCC countries (and Iraq) that have reportedly enacted the bulk of the production cuts are currently in the lowest domestic demand period of the year and have significant flexibility to reduce production but maintain exports,” BMI said.
In another indicator that there is still plentiful supply available despite the cuts, traders are ceasing the opportunity of higher crude prices following OPEC\’s decision to cut output to send record volumes of 22 million barrels of surplus European and Azerbaijani oil to Asia.
(Reporting by Henning Gloystein; Editing by Joseph Radford and Kenneth Maxwell)