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Oil prices edged up on Wednesday after posting two days of declines at the start of the week. Support came from a report that US crude inventories are not rising as much as expected during the spring season now starting, implying healthy demand, and from strong China data.
US West Texas Intermediate (WTI) crude futures were at $60.84 a barrel at 0225 GMT, up 13 cents, or 0.2 per cent, from their previous close. Brent crude futures were at $64.74 per barrel, up 10 cents, or 0.15 per cent. US crude inventories rose by 1.2 million barrels in the week to March 9, to 428 million barrels, the American Petroleum Institute said on Tuesday. That compared with analysts' expectations for an increase of 2 million barrels.
Support also came from China, where January-February domestic crude oil production fell 1.9 per cent on the year to 30.37 million tonnes, equivalent to 3.77 million barrels per day (bpd), according to data from the National Statistical Bureau on Wednesday. At the same time, crude oil throughput rose 7.3 per cent to 93.4 million tonnes, implying a need for more imports.
China's industrial output grew 7.2 per cent in the first two months of the year compared with the same period last year, beating expectations of a 6.1 per cent hike. Despite this, oil markets remain relatively weak. Prices have not returned to their January highs of over $70 per barrel for Brent and almost $67 for WTI. “The ever-expanding US supply continues to pose significant downside risk to oil prices,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA.
US crude production has soared by almost a quarter since mid-2016 to 10.37 million bpd, overtaking output by top exporter Saudi Arabia. US production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).
Weekly US crude production figures will be published by the Energy Information Administration (EIA) later on Wednesday. The increases in US production has this year exceeded the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), which have been in place since 2017 in an effort by the cartel, and supported by non-OPEC member Russia, to prop up prices.
Estimates by the EIA show global supplies will exceed 100 million bpd for the first time in the second quarter of 2018, while demand will only break through that level in the third quarter, implying a slightly oversupplied market. That would be a reversal from a supply deficit in 2017 and early 2018.
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