LONDON (Reuters) – Brent oil lingered below this week’s highs on Thursday, as optimism over OPEC’s commitment to controlling its output was partly offset by another rise in U.S. inventories.
The oil price touched $71 a barrel on Tuesday, near its high for the year, but has struggled to gain further traction since then, despite supportive comments from the Organization of the Petroleum Exporting Countries.
June Brent crude futures LCOc2 were down 11 cents at $68.65 a barrel by 0911 GMT, while the May contract LCOc1, which expires later on Thursday, was down 9 cents at $69.44.
U.S. WTI crude futures CLc1 were at $64.51 a barrel, up 13 cents from their last close.
Oil has risen by 4 percent since January, on track for its third consecutive quarter of price increases and the longest stretch of quarterly gains since late 2010.
“Right now, oil looks fragile,” Petromatrix strategist Olivier Jakob said. “The price action last week was pretty clear. The objective on that move was to take out the highs of 2018, but that’s not been done and the price action of the last three days has not been very convincing,”
OPEC, Russia and some other non-OPEC producers started cutting output in January 2017, lifting the price of Brent – the benchmark for most of OPEC’s exports – by about a quarter since.
Sources at OPEC said the group and its allies were likely to keep their deal on cutting output for the rest of 2018 when they meet in June.
But rising inventories and production in the United States has capped gains in crude prices. Commercial U.S. stocks rose by 1.6 million barrels in the last week C-STK-T-EIA to 429.95 million barrels, while output hit a record 10.43 million bpd, the Energy Information Administration (EIA) said.
(For a graphic on U.S. oil production click reut.rs/2pNOZWr)
This week marked the launch of the Shanghai crude oil futures contract ISCc1, which has lost about 10 percent since it first opened on Monday. It ended Thursday’s session at 409.7 yuan ($65.18) a barrel.
Despite high volatility and scepticism about Shanghai’s trading hours and delivery conditions, most analysts expect the contract to establish itself as a third global oil price benchmark next to Brent and WTI.
Goldman Sachs described the start of trading as having been “relatively successful.”
“It is the first onshore Chinese commodity contract that allows direct trading by foreign investors and is denominated in RMB (yuan), indirectly promoting the use of the Chinese currency,” the bank said.
(For a graphic on global crude futures volumes by contract click reut.rs/2GkLih8)
($1 = 6.2856 Chinese yuan renminbi)
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