Oil prices fell on Friday after U.S. crude inventories rose for a seventh week, showing the market is still struggling to ease oversupply despite many producers’ efforts to rein in output.
U.S. crude stocks USOILC=ECI rose by 564,000 barrels in the week to Feb. 17, according to the Energy Information Administration (EIA), although the gain was below analysts’ expectations for an increase of 3.5 million barrels. [EIA/S]
The continued rise in U.S. inventories comes as members of the Organization of the Petroleum Exporting Countries and other producers have cut output.
Their joint compliance with a production-reduction deal reached at the end of last year was around 86 percent in January, according to OPEC sources quoting results from a technical committee meeting held this week.
The United States, which is not part of the deal, continues to ramp up production. Analysts at ING said they expected U.S. output to keep rising as prices remained strong enough to encourage further drilling.
Benchmark Brent crude oil LCOc1 was down 48 cents at $56.10 a barrel at 0908 GMT, while U.S. West Texas Intermediate CLc1 traded at $54.06 a barrel, down 39 cents.
“Prices continue to retreat on repeated failure to rise above the upper end of their trading ranges and yesterday’s inventory data also weighs,” said Carsten Fritsch, analyst at Commerzbank in Frankfurt.
However, signs have started to emerge that traders are depleting storage levels, beefed up while oil prices were weak.
In the United States, traders are draining the priciest storage tanks as strengthening markets make it unprofitable to store for future sale and cuts in global production open export opportunities.
“Current oil prices are neither sustainable for OPEC or the industry,” AB Bernstein said in a note. “As such, inventories will have to fall, which we expect will be clearer in the spring after the seasonal build.”
In Asia, traders are selling oil held in tankers anchored off Malaysia, Singapore and Indonesia.
More than 12 million barrels of oil has been taken out of storage in tankers berthed off Southeast Asian countries this month, shipping data in Thomson Reuters Eikon shows.
(Additional reporting by Aaron Sheldrick in Tokyo)