By Amanda Cooper
LONDON (Reuters) – Oil steadied on Wednesday after OPEC said it was committed to eroding a global supply overhang that has dogged markets since 2014, but with U.S. output and inventories rising, analysts said prices looked vulnerable.
The oil price got an early lift from comments by the secretary-general of the Organization of the Petroleum Exporting Countries, who said the group was committed to restoring market stability by bringing global inventories down to the industry’s five-year average.
But an investor shift out of equities and commodities and into perceived safe-havens such as U.S. Treasuries offset some of this boost.
Brent crude futures (LCOc1) were up 5 cents at $54.94 a barrel at 0908 GMT, while U.S. West Texas Intermediate (WTI) futures (CLc1) were up 3 cents at $52.44 a barrel.
“Is sentiment on the oil market now taking a negative turn again? Looking at the latest price reactions, one might conclude that the only reason for the previous price rise was the expectation of further production cuts on the part of OPEC,” Commerzbank (DE:CBKG) strategist Carsten Fritch said.
“After all, the oil price has stopped reacting to the factors which would normally support it ever since the Saudi oil minister (Khalid) al-Falih put at least something of a dampener on such expectations,” he said, referring to Falih’s comments to Al-Arabiya television on how it could be premature to discuss an extension to OPEC’s supply cuts.
OPEC and other producers such as Russia have agreed to cut output by almost 1.8 million barrels per day (bpd) during the first half of 2017 to drain a supply overhang that has persisted for nearly three years.
In politics, U.S. President Donald Trump ordered a review of whether the lifting of sanctions against Iran was in the United States’ national security interests.
Many U.S. sanctions against Iran were lifted in late 2015 under a nuclear deal, allowing Tehran to more than double its crude exports over 2016, adding to the global overhang.
U.S. markets remain heavily oversupplied, data from the American Petroleum Institute showed on Tuesday.
Although crude inventories fell by 840,000 barrels in the week to April 14 to 531.6 million barrels, they held near record highs, while gasoline stocks rose by 1.4 million barrels as refinery runs increased by 334,000 bpd.
“Unless the (EIA) data shows something drastically different, this report should cause a severe dent in the bullish case (for oil prices),” said Sukrit Vijayakar, director of energy consultancy Trifecta.
Official U.S. oil data is due to be published on Wednesday by the Energy Information Administration (EIA).