(Bloomberg) -- Oil headed for its first back-to-back weekly loss this year as swelling U.S. crude inventories and Russia’s failure to meet a targeted production cut eased fears of a looming supply crunch.
Futures in New York edged lower Friday after dropping 2.8 percent in the previous session. Russia pumped more crude in April than it had agreed to under the OPEC+ deal to curb output, government data showed Thursday, while American stockpiles rose last week to the highest since 2017. The reports came as U.S. exemptions allowing some countries to keep buying Iranian oil expired.
The White House’s announcement that it would end the Iranian waivers pushed crude to a six-month high last week, but those gains have since evaporated amid signs the supply outlook may be better than previously thought. Saudi Arabia, the world’s biggest exporter, has pledged to keep the market balanced, but has also signaled the Organization for Petroleum Exporting Countries and its allies could extend production curbs through the end of the year.
“Oil’s rally was mainly driven by the U.S. sanctions on Iran and OPEC’s output cuts, which have already happened,” said Kim Kwangrae, a commodities analyst at Samsung (KS:005930) Futures Inc. in Seoul. “But further gains in American shale production and the possibility of OPEC+ ending its curbs will likely drag prices down from here, and they could go as low as the high fifties.”
West Texas Intermediate crude for June delivery declined 6 cents to $61.75 a barrel on the New York Mercantile Exchange at 7:31 a.m. in London after closing $1.79 lower at $61.81 on Thursday. The contract has fallen 2.4 percent this week, on track for the biggest weekly loss since early March.
Brent for July settlement fell 22 cents to $70.53 a barrel on the London-based ICE (NYSE:ICE) Futures Europe exchange after dropping 2 percent to a three-week low of $70.75 on Thursday. It’s down 2.3 percent for the week, following a five-week run of gains. The global benchmark crude was at a premium of $8.69 to WTI for the same month.
Russia produced 45.97 million tons of crude in April, preliminary data from its energy ministry showed. That was 185,000 barrels a day less than the October daily baseline, according to Bloomberg calculations, compared with its pledge to cut by 228,000 barrels a day. U.S. stockpiles rose by 9.93 million barrels last week, Energy Information Administration figures showed Wednesday. That was more than five times as much as forecast in a Bloomberg survey.
President Donald Trump has said that Saudi Arabia and other OPEC suppliers will make up for the lost Iranian barrels. Still, Khalid Al-Falih, the kingdom’s oil minister, said earlier this week that almost all ministers from the group want to extend the current agreement to curb output.
“I still think the market is very tight,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “Everyone out there naturally assumes Saudi will produce more, but the fact is Saudi has not committed and it also takes time to ramp up your production.”
