Oil prices eased on Thursday in follow-on selling after the U.S. government reported a rise in crude and gasoline stocks, allaying some concern over supplies for summer driving demand.
London Brent crude fell 51 cents to $32.94 a barrel, while U.S. light crude in New York was 16 cents lower at $36.56 a barrel.
The U.S. Energy Information Administration (EIA) said crude stocks rose 3.2 million barrels to 295.4 million barrels last week, well above a Reuters survey forecast of an average 1.9 million barrel build.
Gasoline stocks were up just 1.0 million barrels at 201.1 million barrels, as refineries ran well below normal levels for the time of year.
“Crude fundamentals continue to soften while robust demand, particularly for transportation fuels, keeps products tight and supported,” said Washington D.C.-based consultants PFC Energy in a report.
High prices have strengthened doubts over how strictly OPEC producers will enforce a pledge made late last month to reduce output by one million bpd, or four percent, from April 1.
Kuwaiti Energy Minister Sheikh Ahmad al-Fahd al-Sabah said on Wednesday that his country has not yet started implementing the April cuts. “As of now, we did not do anything with our production levels. No, not yet,” he told Reuters.
March production from the 10 members with quotas was around 2.6 million barrels per above the 23.5 million bpd ceiling that took effect in April.
Kuwait could further increase unofficial production above the agreed quota if oil prices remain high, Sabah said. “I think so, this is (the reality of) the market,” he said.
The U.S. dollar’s rise to a four-month high against the euro has also weighed on prices. A slide in the dollar’s value over the last year prompted speculative hedge funds to switch big sums into commodity markets.
Even so, low U.S. gasoline stocks heading into the peak summer driving season, as well as strong Chinese consumption and fears that violence in Iraq could threaten oil supplies, have kept U.S. crude near a 13-year closing high above $38 hit last month.
“There is more crude coming into the US system than product going out,” said Edward Meir of Man Financial in a report.
“Somewhere in the chain, the crude/gasoline conversion process is getting bogged down by either lingering refinery maintenance problems and/or production inefficiencies generated by the various state gasoline specifications.”
The Environmental Protection Agency will decide “in the next few weeks” whether to grant temporary waivers from cleaner-burning summer gasoline standards requested by California and New York, the head of the agency Mike Leavitt said on Wednesday.
The EPA requires the two states to sell gasoline blended with ethanol or another additive that raises its oxygen content, making the fuel burn cleaner and release fewer exhaust fumes.
The two states have asked the EPA for temporary exemptions to the oxygenate mandate, saying the tough requirements permit fewer refiners to make the fuel and the gasoline is more expensive.