Oil prices fell for a second day on Wednesday after a report that crude stockpiles in the U.S., the world’s biggest oil user, surged and on signs major producers are unlikely to change their output policy at a technical meeting next week.
Brent crude futures for May dropped 74 cents, or 0.9%, to $85.51 a barrel at 0420 GMT. The May contract is set to expire on Thursday and the more actively traded June contract declined 68 cents, or 0.8%, at $84.95.
Prices have retreated this week 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 a potential inaction by OPEC+ in its output policy next week saw further unwinding in oil prices in today’s session, as profit-taking accelerates following a strong rally in mid-March,” said Jun Rong Yeap, a market strategist at IG in Singapore.
U.S. crude oil inventories rose by 9.3 million barrels in the week ended March 22, according to market sources citing American Petroleum Institute figures on Tuesday.
Distillate inventories also rose by 531,000 barrels.
Gasoline stocks however fell by 4.4 million barrels.
The Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia, also known as OPEC+, is unlikely to make any oil output policy changes until a full ministerial gathering in June, three OPEC+ sources told Reuters ahead of a meeting next week.
The group will hold an online meeting of its Joint Ministerial Monitoring Committee on April 3 to review the market and members’ implementation of output cuts.
Earlier this month, OPEC+ members agreed to extend their output cuts of about 2.2 million barrels per day to the end of June.
Russia has ordered companies to cut their output to comply with the target, Reuters reported on Monday, and Iraq’s oil ministry said on March 18 it would reduce its exports to compensate for earlier over production exceeding its quota limits.
By announcing these curtailments, ability of the OPEC and the wider OPEC+ to comply with its cuts has been called into question.
OPEC exceeded its targets by 190,000 bpd in February, according to a Reuters survey, with Iraq among the over producers.
Highlighting that Iraq is among the OPEC+ members that have admitted to overproducing in recent months, analysts at ANZ said in a report on Wednesday, “traders are also watching OPEC members for any sign they may be altering their stance on production quotas.”
