Oil Drops On Report Of Higher U.S. Inventories

OIl prices were lower early on Wednesday on reports that U.S. inventories have continued to rise despite production cuts from OPEC and Russia and the removal of supply from Venezuela and Iran.

West Texas Intermediate crude for July delivery was last seen down US$1.50 to US$51.77 per barrel while August Brent was down US$1.59 to US$60.70.

The drop came after the American Petroleum Institute’s weekly survey of private U.S. oil stocks rose by 4.9 million barrels last week, while analysts had expected a small drop.

The U.S. Energy Information Administration will release its more widely followed look at inventories at 10:30 a.m. Eastern time, and is expected to report a small rise of 80,000 barrels, Marketwatch reported.

In a research report released Wednesday, Goldman Sachs characterized the oil market as suffering from “fundamental uncertainty” given a clouded outlook for the global economy because of U.S. trade wars, Brexit and the unknown outlook for production from Venezuela and Libya. It said it expects OPEC and Russia to agree to extend 1.2 million barrels per day of production cuts past the June expiry of their current agreement.

“We believe that this will lead the group to roll forward its current agreement, with likely no change to country level quotas given the difficulty in determining required production levels in coming months,” the investment bank said.

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