Oil holds near four-month low amid stockpile surge

June 05, 2024 (MLN): Oil prices held near a four-month low, with an industry report signaling a rise in US crude stockpiles, further dampening sentiment compounded by OPEC+’s plan to boost supply.

Brent crude traded near $77.5 per barrel, largely unchanged from the previous day. It closed lower for a fifth session yesterday and has plunged almost 5% this week.

While West Texas Intermediate crude (WTI) was at $73.21 per barrel.

The American Petroleum Institute reported US inventories expanded by 4.1 million barrels last week, according to people familiar with the data as reported by Bloomberg.

The API also reported crude stockpiles increased at the storage hub at Cushing, Oklahoma, where the US benchmark is priced.

There was also a large build in nationwide gasoline and distillate inventories.

Oil has tumbled around 5% this week following a decision by OPEC+ on Sunday to start unwinding supply cuts in the fourth quarter, despite concerns over demand and higher output from outside of the group.

Traders who rely on trend-following algorithms have compounded the selloff, Bloomberg said.

While the Organization of the Petroleum Exporting Countries and its allies have spooked the market with their decision, RBC Capital Markets LLC predicts the group will “hit the kill switch” on returning supply if weakness persists.

Most analysts had expected OPEC+ to extend curbs through to year-end.

More supply from OPEC+ during a period of softer economic activity and easing geopolitical tensions will likely drive oil prices lower, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova Pte in Singapore.

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