Oil prices dropped on Thursday on doubts over the ability of crude producers to agree to extend record output cuts, heightened by worries over a build in U.S. fuel inventories. Brent crude LCOc1 futures eased by 29 cents to $39.50 a barrel by 0839 GMT, heading for its first fall in six sessions. U.S. West Texas Intermediate (WTI) crude CLc1 futures dropped 53 cents to $36.76.
Saudi Arabia and Russia, two of the world's biggest oil producers, have agreed to support an extension into July of the 9.7 million barrels per day (bpd) supply cuts backed in April by the OPEC+ group, comprising the Organization of the Petroleum Exporting Countries and other major producers.
But they failed to agree on holding an OPEC+ meeting on Thursday to discuss the cuts, with OPEC sources saying it would be conditional a deepening of cuts by countries that have not complied with their targets so far. Saudi Arabia, Kuwait and the United Arab Emirates are not planning to extend voluntary additional output cuts of 1.18 million bpd after June, indicating that crude supply could rise next month regardless of any OPEC+ decision.
Oil Prices Fall
"Whilst the production group's laggards were given two more weeks to prove that they are willing to share the burden that comes with lower output levels, the market was given the same amount of time to keep pondering. One thing that is guaranteed for the next few weeks is volatility," PVM analysts said.
Also weighing on prices, official U.S. data showed that gasoline stocks rose by 2.8 million barrels, nearly triple what analysts had expected. Distillate stocks rose by 9.9 million barrels, nearly four times more than expected.
In Asia, the volume of oil products traded during S&P Global Platts' Market-on-Close process plunged 74 percent in May from a year earlier, data analysed by Reuters showed. Ringing a bullish note, however, Russia's Energy Minister said that the oil market in July could face a shortage of 3-5 million bpd, Interfax news agency reported.