By Henning Gloystein
SINGAPORE (Reuters) – Oil prices gave up earlier gains as the relentless rise in U.S. crude production threatens to undermine efforts led by producer cartel OPEC to tighten the market.
Brent crude futures
U.S. West Texas Intermediate (WTI) crude futures
Both benchmarks on Wednesday hit their highest levels since early February, having risen around 10 percent from March lows.
An overall mood of confidence in the oil market is being tempered by U.S. crude production
Despite the relentless rise in U.S. output, up by almost a quarter since mid-2016, traders said oil markets remain well supported.
In a sign of healthy demand, U.S. crude inventories
“Inventory data for last week showed a surprise crude draw as well as significant drawdowns in both gasoline and distillates inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
(GRAPHIC: U.S. crude oil production and inventories – http://reut.rs/2psNxHU)
Dutch bank ING said the drawdown in U.S. crude inventories was down to a fall in imports by around 500,000 barrels per day (bpd) to an average 7.08 million bpd last week, and a rise in exports by 86,000 bpd to an average 1.57 million bpd. Also, refinery utilization rates rose above 90 percent for the first time since early February.
Further supporting oil prices has been supply restraint led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which started in 2017 and is scheduled to go on for the rest of 2018.
OPEC said on Wednesday the cuts were close to having the desired effect of bringing down global inventories to five year averages, although it gave little detail.
U.S. bank Goldman Sachs said OPEC was “likely to overshoot on the inventory rebalancing”, and as a result, it saw Brent reaching $82.50 per barrel by mid-year.”
(Reporting by Henning Gloystein; Editing by Richard Pullin and Sherry Jacob-Phillips)