API reports inventories drop; U.S. government’s weekly update eyed
By Claudia Assis and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Crude-oil futures turned higher Wednesday, rallying to trade above $100 a barrel as the Organization of the Petroleum Exporting Countries kept its production quotas unchanged.
Light, sweet crude for July delivery CL1N +1.44% added $1.97, or 2%, to $101.93 a barrel on the New York Mercantile Exchange.
July Brent crude, the benchmark for Europe, gained $1.18, or 1%, to $117.99 a barrel on ICE Futures Europe in London.
OPEC member countries meeting in Vienna decided to maintain official production targets after they couldn’t reach an agreement on raising output, and some members vowed to revisit the issue in three months, according to media reports.
Leading up to the meeting, there were growing expectations that the cartel would decide to increase its official production quotas.
OPEC’s official output quota has been at 24.845 million barrels a day since January 2009. However, analysts polled by Platts estimated that output from the 11 members under the quota surpassed the official quota by 1.3 million barrels a day in April.
“While OPEC should certainly tidy up the quotas, the market requires an additional 3 million barrels per day of crude in the third quarter over and above what OPEC is currently producing and thus simply increasing the quota will do little to address this issue,” analysts at Barclays Capital said ahead of the meeting. Read more on what was expected from OPEC.
Analysts at Commerzbank also said that if OPEC raised output quotas by around 1.4 million barrels a day, it “would merely amount to an adjustment to reality and not constitute any change in production policy.”
Saudi Arabia is the only OPEC member “with significant spare capacities at present,” the Commerzbank analysts wrote in a note. “That said, Saudi Arabia has announced that it intends to step up production considerably even without an official decision.”
Separately, the American Petroleum Institute reported a decline in weekly crude-oil inventories late Tuesday. Crude inventories declined 5.5 million barrels in the week ended June 3, according to the trade group.
The Washington-based group also reported a decline on the week for gasoline stockpiles of 161,000 barrels, and an increase of 1.77 million barrels for supplies of distillates.
The U.S. government will release its own more closely watched weekly update on fuel stockpiles Wednesday at 10:30 a.m. Eastern.
