Oil eases back from 2018 highs above $70 a barrel

LONDON - 28 March 2018: Oil fell on Wednesday as investors took profit on a rally the previous day to this year’s highs after a report showed a surprisingly large increase in U.S. crude inventories.

May Brent crude futures LCOc1, which expire on Thursday, were at $69.70 per barrel, down 41 cents on the day by 0917 GMT, while June futures LCOc2 were down 44 cents at $69.02.

WTI futures CLc1 were down 60 cents at $64.65 a barrel.

Traders said most pressure ensued after the American Petroleum Institute (API) on Tuesday reported a surprise 5.3 million barrels rise in crude stocks in the week to March 23, against expectations for a decline of to 430.6 million barrels.

The oil price has risen in seven out of the last 9 months and has increased by more than 4 percent this year, making this the third consecutive quarter of gains, which is the longest stretch since late 2010.

“After it rebounded from its early-week high, profit-taking is likely to have ensued,” Commerzbank’s Carsten Fritsch said in a note.

“This was exacerbated by an appreciating U.S. dollar and an unexpected 5.3 million barrel rise in US crude oil stocks last week, as reported by the API after close of trading yesterday.”

Official U.S. inventory data will be published by the Energy Information Administration (EIA) late on Wednesday.

Robert Carnell, chief economist and head of research at Dutch bank ING in Asia told the Reuters Global Markets Forum on Wednesday that “more supply coming from the U.S.” would also likely weigh on oil prices.

U.S. oil production has risen by nearly 25 percent in the last two years to over 10 million barrels per day, C-OUT-T-EIA, taking it past top exporter Saudi Arabia and within reach of the biggest producer, Russia, which pumps around 11 million bpd.

Wednesday’s price falls came despite Saudi Arabia saying it was working with Russia on a historic long-term pact that could extend controls over world crude supplies by major exporters for many years.

Saudi Crown Prince Mohammed bin Salman told Reuters that Riyadh and Moscow were considering greatly extending a short-term alliance on oil curbs that began in January 2017 after a crash in crude prices, with a partnership to manage supplies potentially growing “to a 10-to-20-year agreement.”

In Asia, Shanghai crude oil futures posted high volumes and volatile trade on their third day of trading.

Spot Shanghai crude futures ISCc1 were down 3.75 percent on Wednesday, to 410.4 yuan ($65.37) per barrel by 0700 GMT.