Oil prices edged lower on Thursday after U.S. crude stockpiles rose to their highest level since December 2017, reinforcing worries that the market is moving into surplus. The pullback was limited by expectations that OPEC could respond with supply cuts when it meets on Dec. 6.
At 0534 GMT, U.S. West Texas Intermediate crude was trading at $54.35 a barrel, down 28 cents, or 0.5 percent, from the previous settlement. Brent crude was at $63.25 a barrel, off 23 cents, or 0.4 percent.
The Energy Information Administration said on Wednesday that U.S. commercial crude inventories increased by 4.9 million barrels last week to 446.91 million barrels. That was the highest reading since December 2017. The agency also said U.S. crude output held at a record 11.7 million barrels per day.
Stephen Innes, head of trading for Asia-Pacific at Oanda in Singapore, said the inventory figures showed continued supply growth alongside record U.S. production. He added that once pipeline bottlenecks in the United States were eased, which he expected in 2019, the argument that global spare capacity was tight would weaken.
Pipeline constraints have left large volumes of U.S. and Canadian crude struggling to reach market because production has grown faster than transport capacity. In Canada, the federal government is considering Alberta’s proposal to help pay for rail cars that would move oil trapped in the province to refineries in the United States.
OPEC, which is dominated by Middle Eastern producers, is concerned that a glut could push prices lower. The group is weighing production cuts at its next meeting, but some members, including Iran, are expected to resist voluntary reductions.
William O’Loughlin, an investment analyst at Australia’s Rivkin Securities, said there was talk that OPEC and Russia could again agree to cut output, but he warned that not every party may be willing to sign on. He also said Saudi Arabia would need to be cautious about upsetting the United States, given President Trump’s repeated calls for cheaper oil.
On Wednesday, Trump praised Saudi Arabia over recent oil prices and urged further declines. In a tweet, he said: “Oil prices getting lower. Great! Like a big Tax Cut for America and the World. Enjoy!... Thank you to Saudi Arabia, but let’s go lower!”
The market backdrop also reflects the longer-running effects of record U.S. output in 2017 and the expectation that transport bottlenecks could still shape trade flows into 2019.
