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UPDATE 8-Oil prices hit lowest since Nov on expanding U.S. inventories

Published 23/03/2017, 01:12 am
© Reuters.  UPDATE 8-Oil prices hit lowest since Nov on expanding U.S. inventories
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* U.S. inventories rose to 533.6 million barrels - API

* OPEC inclined to extend cuts, wants non-OPEC backing

* Rising U.S. production undermines OPEC reduction effort

* Upcoming: U.S. EIA releases petroleum status report at 1430 GMT (Adds latest prices, quotes)

By Scott DiSavino

NEW YORK, March 22 (Reuters) - Oil prices fell to almost four-month lows on Wednesday after data showed U.S. crude inventories rising faster than expected, piling pressure on OPEC to extend output cuts beyond June.

The American Petroleum Institute said late Tuesday that U.S. inventories climbed by 4.5 million barrels to 533.6 million last week, outpacing analyst forecasts of 2.8 million. now want to see whether Wednesday's figures from the U.S. Energy Information Administration confirm the rise. EIA will release its report at 10:30 a.m. EDT (1430 GMT). EIA/S

"With U.S. crude stocks continuing to mount into record territory both in total and at Cushing following almost two months of OPEC production restraint, we feel that the odds of a gradual unravelling in the OPEC agreement have been increased significantly," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Global benchmark Brent LCOc1 futures for May delivery were down 59 cents, or 1.1 percent, at $50.37 a barrel by 9:48 a.m. EDT (1348 GMT). Earlier the contract fell as low as $50.05, its lowest since Nov. 30 when OPEC countries agreed to cut output.

On its first day as the front-month, U.S. West Texas Intermediate (WTI) crude CLc1 CLK7 futures for May were down 53 cents, or 1.1 percent, at $47.71 per barrel.

"A look below $50 (for Brent) is quite possible today if (EIA) data show a similar pattern, but it's impossible to say how far below $50," Commerzbank (DE:CBKG) analyst Carsten Fritsch said.

A deal between the Organization of the Petroleum Exporting Countries and some non-OPEC producers to reduce output by 1.8 million barrels per day (bpd) in the first half of 2017 has had little impact on bulging global stockpiles of oil.

OPEC, which sources say is increasingly leaning towards extending cuts, has broadly delivered on pledged reductions so far, but non-OPEC states have yet to cut fully in line with commitments.

"OPEC has used up most of its arsenal of verbal weapons to support the market. One hundred percent compliance by all is the only tool they have left and on that account they are struggling," said Ole Hansen, head of commodity strategy at Saxo Bank.

U.S. shale oil producers have been adding rigs, pushing up the country's weekly oil production C-OUT-T-EIA to about 9.1 million bpd for the week ended March 10, up from an average of 8.9 million bpd for calendar 2016, according to U.S. energy data.

"OPEC's market intervention has not yet resulted in significant visible inventory drawdowns, and the financial markets have lost patience," U.S. bank Jefferies said in a note.

But the bank said the market was undersupplied and, if OPEC extended cuts into the second half, inventories would draw down and prices recover above $60 in the fourth quarter.

However, it said U.S. crude production was expected to grow by 360,000 bpd in 2017 and 1 million bpd in 2018, and a price recovery could spur more U.S. shale activity.

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