Oil below $37 as US inventory rise counters output freeze plan

Brent was trading at $36.54 a barrel, while WTI was down 66 cents at $33.74

Oil edged further below $37 a barrel on Wednesday as an industry report showing a rise in US crude stockpiles to a new record countered support from producer efforts to tackle a supply glut.

US crude inventories jumped by 9.9 million barrels last week, the American Petroleum Institute (API) said on Tuesday, much more than the 3.6-million-barrel increase analysts had forecast. 

Global benchmark Brent crude was down 27 cents at $36.54 a barrel by 0946 GMT. On Tuesday, it reached $37.25, the highest in almost two months. US crude, also known as WTI, was down 66 cents at $33.74.

"The strong inventory build reported by the API would explain why WTI is falling more than Brent," said Carsten Fritsch, analyst at Commerzbank in Frankfurt.

 

Traders will look closely at the US government's weekly supply data on Wednesday for confirmation of the inventory build. The Energy Information Administration figures are due at 10:30 a.m. EST (1530 GMT).

Brent has risen 35% from a 12-year low of $27.10 hit on Jan. 20, adding to expectations that further drops may not be on the cards. An analyst at the International Energy Agency said on Tuesday prices appeared to have bottomed.

Crude has collapsed from more than $100 in mid-2014, pressured by excess supply and a decision by the Organization of the Petroleum Exporting Countries to abandon its traditional role of cutting production by itself to boost prices.

After more than a year of failing to agree any steps, OPEC and outside producers have stepped up diplomatic activity to fix the supply glut. Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia said on February 16 they would freeze output.

In an early sign that Moscow will stick to the plan, Russia reported on Wednesday its oil output was little changed in February. Saudi Arabia has yet to report its production, but a Reuters survey this week found no sign of an increase in February.

"Although the market had hoped that some of these producers would immediately cut oil production, we still see this agreement as a strong message," ABN Amro said in a report.

"By announcing a production freeze, the global oil coalition has set a floor under oil prices."