Oil prices slip as U.S. supply growth offsets OPEC support

By Amanda Cooper

LONDON (Reuters) - Oil prices slipped on Thursday, as supportive comments from OPEC that its output curbs were likely to stay in place for the rest of the year were offset by another rise in U.S. inventories.

The oil price had touched $71 a barrel on Tuesday, near its high for the year, but has dipped since then.

June Brent crude futures were down 35 cents at $68.41 a barrel by 1229 GMT, while the May contract (LCOc1), which expires later on Thursday, was down 26 cents at $69.27.

WTI crude futures (CLc1) fell 7 cents to $64.31 a barrel.

Oil has risen by 4 percent since January, on track for its third consecutive quarter of price increases and the longest stretch of quarterly gains since late 2010.

"Right now, oil looks fragile," Petromatrix strategist Olivier Jakob said. "The price action last week was pretty clear. The objective on that move was to take out the highs of 2018, but that's not been done and the price action of the last three days has not been very convincing,"

OPEC, Russia and some other non-OPEC producers started cutting output in January 2017, lifting the price of Brent - the benchmark for most of OPEC's exports - by about a quarter since.

Sources at OPEC said the group and its allies were likely to keep their deal on cutting output for the rest of 2018 when they meet in June.

But rising inventories and production in the United States has capped gains in crude prices. Commercial U.S. stocks rose by 1.6 million barrels in the last week to 429.95 million barrels, while output hit a record 10.43 million bpd, the Energy Information Administration (EIA) said.

Inventories tend to build over the first quarter of the year as refineries shut down for maintenance. U.S. crude stocks have risen by 5.5 million barrels, marking the smallest increase in the first three months of the year since 2003.

(Graphic: U.S. crude inventories see smallest Q1 build since 2003 - https://reut.rs/2pQmAhB)

"This is the third consecutive week of stock build at the WTI delivery hub, and as a result we continue to see the Brent-WTI spread widen," ING said in a note.

The premium of Brent over WTI has grown to nearly $5 a barrel, the highest since January, up from about $2.70 a month ago, making Brent-linked crudes less attractive to refiners than U.S. oil.

This week marked the launch of the Shanghai crude oil futures contract (ISCc1), which has lost about 10 percent since it first opened on Monday. It ended Thursday's session at 409.7 yuan ($65.18) a barrel.

($1 = 6.2856 Chinese yuan renminbi)

(For a graphic on global crude futures volumes by contract click https://reut.rs/2GkLih8)