Oil sinks toward $60 as inventory, production gains weigh

David McNew  Getty Images

David McNew Getty Images

Brent crude oil futures were down 18 cents to $64.46 per barrel by 12:45 p.m. EST (1645 GMT), while U.S. West Texas Intermediate (WTI) futures were down 9 cents at $60.62 per barrel.

Brent crude was last up eight cents at $64.72 US a barrel, climbing from an earlier low of $64.43.

On Monday, the EIA said production from major US shale formations should rise by 131,000 barrels per day in April vs. the previous month to an all-time high of 6.95 million bpd.

Rising US output, as well as seasonally low demand, mean US crude inventories rose by 1.2 million barrels in the week to 9 March to 428 million barrels, the American Petroleum Institute (API) said on Tuesday.

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Earlier Wednesday, OPEC projected that USA and other non-OPEC supply growth will outpace global demand growth in 2018, raising the risk of imbalance in the oil markets and lower crude prices. The total OECD commercial stocks dropped 206 million barrels compared to the same time one year ago, OPEC said.

China beat forecasts with a 7.2 percent year-on-year rise in industrial output in the first two months of 2018, while data showed Chinese crude output fell 1.9 percent.

Oil prices got a boost early in the session from a broader investor push into commodities after Chinese data showed industrial production in the world's largest importer of raw materials grew more than expected over the first two months of the year.

Despite this, oil markets remain relatively weak.

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Moody's noted that oil prices have firmed since the Organisation of Petroleum Exporting Countries' November 2016 agreement to cut oil production by 1.2 million barrels per day (bpd), while non-Opec members, led by Russian Federation, agreed to cut production by 558,000 bpd.

"The ever-expanding U.S. supply continues to pose significant downside risk to oil prices", said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA.

Weekly U.S. crude production figures will be published by the Energy Information Administration (EIA) later on Wednesday.

USA production growth is still expected at 2.7 percent in 2018, up from 2.3 percent in 2017. OPEC trimmed its 2018 demand forecast for its own crude by 250,000 bpd to 32.61 million bpd, the fourth consecutive decline.

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Cartel members' production went down 77,000 bpd from January to February, the report said, citing secondary sources. That's nearly a 1-million bpd rise in just a bit over two months.

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