SINGAPORE: Oil prices fell in Asia on Friday after a sharp rise in US crude stockpiles and Saudi Arabia’s rejection of proposed output cuts shot down a rally by the battered commodity.
The about-turn came as the US Energy Department reported a 2.1 million barrel increase in US commercial crude inventories, to the highest in more than eight decades, as well as sizeable increases in gasoline and other refined products.
An inventories rise typically suggests soft demand in the world’s biggest oil consumer and is bad news for a market wallowing in excess supply.
The price rally also fizzled out after Saudi Foreign Minister Adel al-Jubeir rejected any reduction in his country’s crude output.
“If other producers want to limit or agree to a freeze in terms of additional production, that may have an impact on the market, but Saudi Arabia is not prepared to cut production,” Jubeir told Agence France-Presse in an exclusive interview.
At 6:30 a.m. local time, US benchmark West Texas Intermediate for delivery in March was down 27 cents or 0.88 percent to $30.50, while Brent crude for April tumbled 33 cents, or 0.96 percent, to $33.95.
On Wednesday, WTI jumped more than seven percent while Brent added 5.6 percent, after Saudi Arabia and Russia, the two biggest producers in the world, agreed to limit their pumping but only if others followed suit.
This sparked hopes the market would stabilize after prices sank to near 13-year lows last week.
However, speaking to Agence France-Presse over the telephone from Sydney, CMC Markets chief market strategist Michael McCarthy said more market volatility can be expected.
“I don’t think anybody seriously believes that anything useful is going to come out of these discussions between OPEC [Organization of the Petroleum Exporting Countries] and Russia,” he said.
Saudi Arabia is regarded as the de facto leader of OPEC.
BMI Research also said any output freeze was unlikely.