Oil prices fell about one per cent after data showed US crude inventories unexpectedly rose 1.6 million barrels last week, weighing on market sentiment.
Brent June crude futures settled 70 cents lower at $US68.76 per barrel, while the front month May contract, which expires on Thursday, fell 58 cents, or 0.8 per cent, to settle at $US69.53 a barrel.
West Texas Intermediate (WTI) crude futures for May delivery fell 87 cents to $US64.38 a barrel, a 1.3-per cent loss.
US crude stockpiles rose as net imports soared by 1.1 million barrels per day, according to data from the US Energy Information Administration.
Stocks at the Cushing, Oklahoma, delivery hub for U.S crude futures also rose 1.8 million barrels, EIA said.
‘Oil supplies at Cushing, Oklahoma are starting to replenish, which is bearish for prices, but they have a long way to go to near normal levels of supply,’ said John Kilduff, partner at energy hedge fund Again Capital LLC in New York.
US crude production also inched up last week to fresh record high at 10.433 million bpd. Output has risen by nearly 25 per cent in the last two years to over 10 million bpd , taking it past top exporter Saudi Arabia and within reach of the biggest producer, Russia, which pumps around 11 million bpd.
US crude’s discount to Brent widened to as much as $US5.22, the biggest since January 24.
‘Costs in the US are getting to be a little bit less expensive to drill and that’s one of the aspects that is potentially driving the spread between Brent and WTI,’ Mark Watkins, a regional investment strategist at US Bank Wealth Management said from Salt Lake City, Utah.
Average breakeven prices to drill a new well in the US range from $US47 to $US55 per barrel depending on the region, according to a Wednesday survey from the Federal Reserve Bank of Dallas.
Brent prices have risen in seven out of the last nine months and have increased by more than 4 per cent so far this year. Prices have also had three consecutive quarters of gains, the longest stretch since late 2010 and early 2011, after production curbs led by the Organization of the Petroleum Exporting Countries since last year.
Wednesday’s price falls came despite Saudi Arabia saying it was working with Russia on a long-term pact that could extend controls over world crude supplies by major exporters for many years.
Saudi Crown Prince Mohammed bin Salman told Reuters on Tuesday that Riyadh and Moscow were considering greatly extending the short-term alliance on oil curbs that began in January 2017 after a crash in crude prices, with a partnership to manage supplies potentially growing ‘to a 10-to-20-year agreement.’