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Oil falls on swelling U.S. stockpiles, Venezuela adds to market uncertainty

World Business

Oil falls on swelling U.S. stockpiles, Venezuela adds to market uncertainty

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Oil prices fell on Wednesday after a rise in U.S. crude inventories, while an intensifying crisis in Venezuela and tightened U.S. sanctions on Iran added further uncertainty to markets.

Brent crude oil futures were at $71.74 per barrel at 0855 GMT, down 32 cents or 0.44 per cent from their last close.

U.S. crude futures were down 49 cents or 0.77 per cent at $63.42 per barrel.
Trading was thin as May 1 is a holiday in many markets.

U.S. crude stocks rose by 6.8 million barrels to 466.4 million barrels in the week to April 26, the American Petroleum Institute (API), an industry group, said on Tuesday.

“U.S. oil stocks are swelling due to an upswing in crude inventories … the glut alarm bells are ringing louder in the U.S.,” PVM Oil Associates strategist Stephen Brennock said.

Markets also keenly watched oil producer Venezuela, where opposition leader Juan Guaido called for an uprising against President Nicolas Maduro.

Many observers fear this could lead to escalating violence and further disruptions to crude supply.

Oil markets have already tightened this year due to supply cuts led by the Organisation of the Petroleum Exporting Countries (OPEC) as well as U.S. sanctions on Venezuela and Iran.

Washington is set to revoke waivers for select countries to import Iranian oil on Wednesday and says it aims to drive down Iran’s crude exports to zero.

“The Iran sanctions come on top of already fragile supplies and raise concerns about tightening markets,” said Norbert Ruecker, head of research at Swiss bank Julius Baer.

OPEC meets in June to discuss production policy. While Washington has demanded the group increase output to make up for the shortfall from Iran.

OPEC’s de facto leader Saudi Arabia said on Tuesday it had no immediate plan to do so.

“Recent comments from (Saudi Energy Minister Khalid) al-Falih confirm our view that the kingdom will respond cautiously with other oil producers and not pre-emptively ramp up production,” said Giovanni Staunovo, analyst at UBS in Zurich.

Rising U.S. output, which has jumped by around 2 million barrels per day (bpd) over the past year to a record 12.2 million bpd, may ease market tightness.

Rising U.S. output, which has jumped by around 2 million barrels per day (bpd) over the past year to a record 12.2 million bpd, may ease market tightness.

Analysts at Bernstein Energy said in a note on Wednesday that given overall supply-and-demand fundamentals, “Brent oil is back to our expected fair value of $70 per barrel.”

(Reuters/NAN)

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