Oil falls 1% as US crude inventories surge

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London, March 27, 2024 – Oil prices fell for a second day, dropping more than 1% on Wednesday on surging U.S. stockpiles and signs that the OPEC+ producer group is unlikely to change its output policy at a technical meeting next week.

Brent crude futures for May dropped 97 cents or 1.12% to $85.28 a barrel by 0929 GMT while the more actively traded June contract fell by 92 cents, or 1.07%, to $84.71.

The May contract expires on Thursday.

U.S. West Texas Intermediate (WTI) crude futures for May delivery fell 93 cents, or 1.14%, to $80.69.

Prices have retreated since climbing to their highest since October last week and remain about 3% above the average closing price in the first week of March.

A sharp rise in U.S. crude inventories and expectations for potential inaction by OPEC+ next week prompted further “unwinding” in oil prices as profit-taking accelerates after the mid-March rally, said IG market strategist Jun Rong Yeap.

U.S. crude oil inventories rose by 9.3 million barrels in the week ended March 22, said market sources citing American Petroleum Institute figures on Tuesday. Distillate inventories rose by 531,000 barrels, but gasoline stocks dropped by 4.4 million barrels.

Official government data will be published on Wednesday at 10:30 a.m. EDT (1430 GMT).

The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, together known as OPEC+, are unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters ahead of next week’s meeting to review the market and members’ implementation of output cuts.

OPEC+ this month agreed to extend output cuts of about 2.2 million barrels per day (bpd) to the end of June, though Russia and Iraq have had to go to extra lengths to tackle over-production.

Those struggles have called into question the group’s ability to comply with cuts, with OPEC having exceeded its targets by 190,000 bpd in February, a Reuters survey showed.

Traders are “watching OPEC members for any sign they may be altering their stance on production quotas,” ANZ analysts said in a report on Wednesday.

Meanwhile, leading German economic institutes said they expect the country’s economy to grow by 0.1% in 2024, down from a previous forecast of 1.3%, in a grim sign for Europe’s economic powerhouse. (Reuters)

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