NEW YORK – Oil turned negative Wednesday, as falling gasoline futures weighed down crude prices on concerns that oversupply in the U.S. would limit the effect of OPEC’s record compliance with its supply-cut accord.
U.S. crude stocks rose 9.5 million barrels last week, the U.S. Energy Information Administration (EIA) said, nearly three times more than forecast, but confirming a trade group’s report late Tuesday of a larger-than-expected build.U.S. crude inventories hit a peak at 518.12 million barrels, while gasoline stocks also touched a record, rising 2.8 million barrels to 259.1 million barrels, according to the EIA.
Gasoline futures fell 0.66 cents a gallon, or 0.45 percent, by 11:35 a.m. ET (1635 GMT).
“Gasoline is playing a leading role in trade action,” said Tony Headrick, energy market analyst at CHS Hedging. “With the excess supply of gasoline, particularly on the East Coast, that’s substantial.”
Brent crude futures fell 30 cents to $55.67 a barrel. U.S. crude futures dipped 26 cents to $52.94 a barrel.
“The U.S. witnessed yet another week of higher-than-expected stock builds; nonetheless, the build was less than last week’s, which helped prices recoup some of the earlier losses,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.
“A build in gasoline stock is in tandem with seasonal norms and further builds are expected in the coming weeks as demand for the fuel remains low.”
To support prices, the Organization of the Petroleum Exporting Countries and other producers, including Russia, are cutting output by almost 1.8 million barrels per day in the first half of 2017.
Although OPEC has made a strong start in complying with the cuts, rising U.S. stocks and a revival of U.S. oil output have limited the price rise.
OPEC in January delivered record compliance of over 90 percent with its output curbs, according to estimates from the International Energy Agency and figures collected by OPEC’s headquarters.
Within OPEC, adherence is mixed. Top exporter Saudi Arabia, keen to make the deal work, said it cut output by more than the amount called for by the agreement.
BMI Research, in a report, said a compliance rate of just 40 percent by Iraq, OPEC’s second-biggest producer, “could prove problematic to group cohesion.”
Russia and the other non-OPEC producers have so far delivered smaller cutbacks. The oil minister of Oman, one of the participating non-OPEC countries, said he expected compliance to improve.