Oil prices fell on Wednesday as oversupply worries returned after Kuwaiti oil workers ended a three-day strike and U.S. industry data indicated a larger-than-expected build in crude inventories last week.
Six supertankers have lined up at Kuwait’s crude export terminal to load oil, and the country has raised its output to 1.6 million barrels per day (bpd) from 1.1 million on Sunday.
The U.S. government’s Energy Information Administration will issue official inventory numbers at 10:30 a.m. EDT EIA/S], following a much stronger-than-expected storage rise reported on Tuesday by American Petroleum Institute.[API/S]
The impending expiry of the front-month May CK6 contract in U.S. crude’s West Texas Intermediate (WTI) futures also weighed, as it traded at a discount of around $1.50 to the June contract CM6 that would become the market’s benchmark from Thursday.
“An expiration of more than $1.50 a barrel in the May-June spread today would send off some additional bearish WTI signals,” said Jim Ritterbusch of Chicago-based energy markets consultancy Ritterbusch & Associates.
May WTI CLc1 was down 71 cents at $40.37 a barrel by 9:39 a.m. EDT. The June contract CLc2 was off 70 cents at $41.77.
Brent’s front-month contract traded 70 cents lower at $43.33 a barrel.
The end of Kuwait’s oil industry strike revived the bearish mood brought on by the failure at the weekend by major crude producers to agree to freeze output at a meeting in Doha, Qatar. The production freeze was designed to ease an oil glut that had brought prices down from a mid-2014 high above $100 a barrel.
“Kuwait is moving back to full production, and we expected that oil would come off more after the Doha deal fell apart, so we’re seeing the impact of that now,” said Bjarne Schieldrop, chief commodity analyst at SEB in Oslo.
Russia’s Energy Minister Alexander Novak said on Wednesday Russia’s oil production could exceed 540 million tonnes this year (10.8 million barrels per day) and cautioned that Saudi Arabia also had potential to hike its output. Source.