Oil slides on swelling US stocks, Venezuela warning

Analysts reckon American inventories added 2.3m barrels in the week to September 16

Gulf News

London: Oil prices edged lower on Tuesday ahead of an expected build in US crude oil stocks and on Venezuelan comments that the oil market remains oversupplied by 10 per cent.

Analysts polled by Reuters expect US commercial crude oil inventories to have risen 2.3 million barrels in the week to September 16, paving the way for a bearish market reaction because a rise in stocks indicates growing oversupply.

The American Petroleum Institute (API) was scheduled to release its weekly crude stocks data at 2030 GMT on Tuesday.

International benchmark Brent crude oil futures were trading at $45.58 per barrel at 0822 GMT, down 37 cents day on day.

US West Texas Intermediate (WTI) crude futures were down 33 cents at $42.97 a barrel.

Oil prices also reacted to comments made by Venezuela’s Oil Minister Eulogio Del Pino on Monday that global oil supply of 94 million barrels per day (bpd) needs to fall by about a tenth if it is to match consumption.

Members of the Organisation of the Petroleum Exporting Countries (Opec) and other oil producers are set to hold an informal gathering in Algiers next week, which the oil market hopes could lead to an agreement to freeze production levels.

Algeria’s Energy Minister Nour Al Deen Bouterfa said on Tuesday that he was “optimistic” participants would reach consensus on how to prop up the oil market.

“I would not be surprised to see some short-covering in the second half of this week just ahead of the informal Opec meeting,” said Tamas Varga, lead oil analyst at London brokerage PVM Oil Associates.

Official data released late on Monday confirmed a rise in Saudi Arabian oil exports in July to 7.622 million bpd, up from 7.456 million bpd in June.

“[An output freeze] would only secure an even higher push of Saudi crude oil and would be a case where the proposed cure is worse than the disease,” said Olivier Jakob, managing director of PetroMatrix in Switzerland.

Technical market indicators were also weak, with WTI likely to test support at $42.78 per barrel soon, after which a fall towards $42 would be likely, according to Reuters analyst Wang Tao.

For Brent, he said prices may test support at $45.63 per barrel and, failing to hold that level, could fall to just over $45 a barrel.