NEW YORK – A surge in US crude and product stockpiles and Saudi Arabia’s rejection of output cuts curtailed a rally in oil prices on Thursday, AFP reports. After surging over 4 percent to almost $32 a barrel, US benchmark West Texas Intermediate for delivery in March finished with just an 11 cent gain at $30.77 a barrel.
London benchmark Brent crude for April was poised to add to Wednesday’s seven percent gain, but then turned tracks and closed down 22 cents at $34.28 a barrel. Cutting short the rebound in the oil market that began last week, the US Energy Department reported a 2.1 million barrel increase in US commercial inventories, along with sizable increases in gasoline and other refined products.
That sign of a still-mounting surplus on the market was followed by the Saudi foreign minister flatly rejecting any reduction in his country’s crude output despite a tentative pact with Russia and other producers to freeze output at January levels.
“If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production,” Adel al-Jubeir told AFP in an exclusive interview. The US Energy Department also warned of more medium-term pressure on the market from Gulf of Mexico producers, which it said would continue to push up output over the next two years despite weak prices.
It said average output from the US section of the Gulf will hit 1.63 million barrels a day this year and rise to 1.91 million barrels a day by the end of 2017. But it also said that low prices have forced a cutback in exploration and development, so that some projects in relatively early stages might not proceed.
Bob Yawger of Mizuho Securities said nevertheless that the market showed some support, due to the meetings between OPEC producers and Russia on keeping production under control to strengthen the market.
“That’s tending to support the market here and keeping it from falling from the face of the earth,” he said.