Oil Holds Near $65 as U.S. Stockpile Drop Counters OPEC Fears

Oil traded near $65 a barrel as an industry report showing a drop in American crude stockpiles helped counter fears that supplies may gain after the U.S. was said to ask OPEC to boost output.

Futures in New York were little changed, following a 1.2 percent advance on Tuesday. The American Petroleum Institute was said to report nationwide crude inventories fell over 2 million barrels last week. Meanwhile, the U.S. government has asked Saudi Arabia and some other members of the Organization of Petroleum Exporting Countries to increase output by about 1 million barrels a day, according to people familiar with the matter.

Oil is trading near the lowest level in almost two months after Saudi Arabia and Russia signaled in late May that they were ready to ease output curbs to fill potential supply losses in Iran and Venezuela. Declining Venezuelan output has been a key support to prices in recent months, despite the nation’s President Nicolas Maduro talking up its output potential on Tuesday. As speculation swirls over whether OPEC and its allies will reach a consensus to relax caps at a meeting in Vienna later this month, Goldman Sachs Group Inc. said the outlook for oil remains bullish.

“The API number, if confirmed should help prices,” says UBS Group AG analyst Giovanni Staunovo. “There have been stories on Venezuelan output, but the market should stay in deficit.”

West Texas Intermediate for July delivery fell 22 cents, or 0.3 percent, to $65.30 a barrel on the New York Mercantile Exchange as of 10:52 a.m. in London. The contract added 77 cents to $65.52 on Tuesday.

Brent futures for August settlement increased 17 cents to $75.55 a barrel on the London-based ICE Futures Europe exchange, after closing 9 cents higher at $75.38 on Tuesday. The global benchmark crude was $10.26 above WTI for the same month, after the premium narrowed for a second session on Tuesday.

U.S. Stockpiles

U.S. crude stockpiles decreased by 2.03 million barrels last week, while the hoard at the key storage hub in Cushing, Oklahoma, also fell by 1.04 million barrels, the industry-funded API was said to report. Energy Information Administration data due Wednesday is expected to show nationwide stockpiles dropped by 2.1 million barrels.

In a rare request, the U.S. government has quietly asked Saudi Arabia and some other OPEC members to boost crude production after retail gasoline prices surged to their highest in more than three years and President Donald Trump publicly complained about the group’s policy and rising oil prices on Twitter. Venezuelan President Maduro said on state television that his nation is ready to increase production if OPEC decided to do so.

Other oil-market news:

Saudi Arabia, the world’s largest oil exporter, raised pricing on key crude grades for buyers in Asia to the highest since 2014 as demand builds in the country’s biggest market amid threats to rival suppliers. Crude prices in the Midland and Permian Basin in the U.S. are below oil at Cushing and Houston as output growth has outpaced the pipeline capacity, and that dynamic is unlikely to change materially until at least the middle of 2019, according to Citigroup Inc. Unipec will nominate 40 percent less term crude supplies from Saudi Arabia for a third straight month for cargoes loading in July, said a senior official with the Chinese oil trader.

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