Oil Prices Ease Despite Continued Supply Disruptions

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/ Source: Reuters
By Reuters

Oil futures edged lower on Wednesday, off 2016 highs hit in the previous session, as the impact of unplanned supply disruptions from Nigeria and Canada were tempered by rising supplies from elsewhere.

International Brent crude futures were trading at $49.05 a barrel at 0858 GMT, 23 cents below their last settlement. U.S. West Texas Intermediate crude futures were 16 cents lower at $48.15 a barrel.

The two contracts hit 2016 highs of $49.75 and $48.76 per barrel, respectively in intra-day trade the previous day.

"The impact of the supply disruptions is clearly bigger than most analysts had expected," ABN Amro chief energy economist Hans van Cleef said.

Unscheduled supply outages in Nigeria and Canada amounting to around 2 million barrels per day (bpd) have supported oil prices in recent weeks.

"Both fundamentals and technicals are lined up for a move through the $50 hurdle," oil brokerage PVM said in a note on Wednesday.

But analysts warned that rising supplies from other countries could weigh on prices once supply disruptions ease.

"There is ... plenty of supply upside elsewhere, particularly in Iran," Vienna-based JBC Energy said in a note on Wednesday.

Data from Iran shows oil exports from the country are recovering faster than analysts had expected.

Exports from the OPEC member country are set to surge in May to 2.1 million bpd, nearly 60 percent above their level a year ago, with European shipments recovering to about half of their pre-sanction levels, according to a source with knowledge of the country's crude lifting plans.

Saudi Arabia's crude oil exports in March, however, fell slightly to 7.541 million bpd from 7.553 million in February, official data showed on Wednesday.

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JBC also warned that a rise in oil prices towards $50 per barrel could reverse some production declines among high-cost producers, including shale drillers in the United States.

Investors will be watching official production and inventory data due on Wednesday from the U.S. Energy Information Administration (EIA).

Crude inventories in the week to May 13 fell by 1.1 million barrels to 541.9 million while analysts had expected a fall of 2.8 million barrels, American Petroleum Institute (APP) data showed on Tuesday.

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 508,000 barrels, the APP said.