Oil falls as US crude stocks hit record for 7th successive week
SINGAPORE, March 31 (Reuters) – Oil futures fell in Asian trade on Thursday amid renewed worries of global oversupply after official data showed U.S. crude inventories rose last week to a record for the seventh time in a row.
That increase came despite seasonal refinery utilisation hitting an 11-year high, while a rise in the dollar index put further pressure on oil prices.
Brent crude futures fell 22 cents to $39.04 a barrel as of 0136 GMT. It ended up 12 cents in the previous session, after touching a session peak of $40.61.
The front-month contract for U.S. crude futures dropped 26 cents to $38.06 a barrel, after settling up 4 cents in the previous session following a gain of 3 percent earlier in the session.
Prices will "zig-zag" for the rest of the year, said Tony Nunan, oil risk manager at Japan’s Mitsubishi Corp.
U.S. crude stocks rose by 2.3 million barrels to 534.8 million barrels in the week to March 25, data from the U.S. Energy Information Administration shows.
But the increase was less than analysts’ expectations of a 3.3 million barrel build after crude imports fell 636,000 barrels per day to 7.4 million bpd.
Refinery crude runs rose by 414,000 barrels per day (bpd) and refinery utilisation rates rose 2 percentage points to 90.4 percent of total capacity, the highest seasonal rate since 2005.
"Commercial inventories will continue to build until May or June. The bearish sentiment (on prices) will continue until we actually see inventories draw down," said Nunan.
Oil prices, which have risen about 50 percent since mid-February, have started to track lower in the past week.
"Oil prices will trend down again … $35 a barrel will be the support level. Low prices are not sustainable in the long-run," Nunan said.
But with OPEC flagging a price of $50 a barrel and oil producers scheduled to meet in Doha on April 17 to discuss a possible output freeze, prices are likely to remain range-bound.
"Anytime prices get close to $45-$50 a barrel, funds that have taken long positions are likely to take profits. Unless things really ignite the global economy, then people will sell-off at that level," Nunan said.
Concerns over global oversupply were further fuelled after crude output from the Organization of the Petroleum Exporting Countries (OPEC) rose in March to 32.47 million bpd from 32.37 million bpd in February, according to a Reuters survey based on shipping and other data.
The increase followed the lifting of Iranian sanctions and near-record exports from southern Iraq that offset maintenance and outages in smaller producers.
Iran is expected to add half a million barrels of oil supply a day within a year from existing oilfields after sanctions were lifted in January, Fatih Birol, the head of the International Energy Agency told Reuters on Wednesday.