Oil edged lower on Wednesday, after U.S. data showed a smaller-than-expected decline in overall crude inventories coupled with another rise in production, hindering OPEC’s efforts to reduce a global surplus of crude. Prices were on pace for their biggest daily percentage decline since early March.
U.S. crude stocks fell 1 million barrels on the week, according to the U.S. Energy Information Administration, a bit less than anticipated. A surprise build in gasoline inventories despite heavier refining activity, along with an increase in U.S. crude production, pushed prices lower.
Gasoline stocks posted a counter-seasonal build of 1.5 million barrels.
“Rising oil output in the U.S. remains the predominant bearish factor for prices despite growing anticipation that OPEC will extend a self-imposed cap on its oil production in the upcoming May meeting,” said Abhishek Kumar, senior energy analyst at Interfax Energys Global Gas Analytics in London.
If the losses hold, it would extend crude’s decline to three straight days. The market received a modicum of support from comments on Wednesday by Mohammed Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, that the group was committed to cutting inventories.
OPEC has had a hard time reducing a global crude glut, as supply remains high in parts of the world, particularly the United States, where inventories were at 532.3 million barrels, only about 3 million less than the record reached in March.
“It seems that the optimism in the oil market we have seen since the last few days of March is running out of steam,” wrote Tamas Varga, PVM Oil Associates analyst, noting the “ever-increasing rise” in U.S. shale output.
OPEC and other producers such as Russia agreed to cut output by almost 1.8 million barrels per day in the first half of 2017 to drain a supply overhang that has persisted for nearly three years.
U.S. stockpiles and production have cast doubt on whether the cuts were enough. U.S. production rose to 9.252 million barrels a day in the most recent week, highest since August 2015.
Geopolitical concerns have helped underpin oil. This week, U.S. President Donald Trump ordered a review of whether the lifting of sanctions against Iran was in the United States’ national interests. A lifting of certain sanctions against Iran in late 2015 allowed Tehran to more than double its crude exports over 2016.