The US Department of Energy announced Wednesday that US crude oil reserves increased by 700,000 barrels last week, which was slightly more than market expectations.
For the second week in a row, total US stocks of oil and oil products have risen despite imports of crude having fallen from 10 million barrels per day in January to nine million barrels over the last two weeks, noted Nic Brown of Natixis.
"Imports are low but there is no shortage of crude," Morgan Stanley's Hussein Allidina said.
The Energy Department report is crucial for the crude market because the United States is the world's biggest oil consuming nation.
Even though US refineries are working harder, DoE data released on Tuesday projected average annual world oil consumption will decline by almost 1.4 million barrels per day in 2009.
The bearish outlook was clouded further by doubts whether the OPEC cartel will announce steeper production cuts at its weekend meeting.
"Rising oil prices have started to reveal cracks in OPEC's resolve as well," said Mike Fitzpatrick of MF Global.
Algerian energy minister and former OPEC president Chakib Khelil told AFP that the market would continue sliding if the cartel refrained from cutting output.
Ministers of the Organization of Petroleum Exporting Countries (OPEC), the cartel that pumps about 40 percent of world crude, meet Sunday in Vienna to discuss whether to slash output in a bid to shore up prices.
"If nothing is done, prices will fall in the second quarter," Khelil said, adding that the market remained oversupplied ahead of OPEC's gathering.
Khelil said he believed the "majority" of OPEC's 12 member nations backed a reduction in production that would help to support prices and in turn boost their incomes.
OPEC had agreed late last year to reduce output by 4.2 million barrels a day as oil prices plunged from record highs of more than 147 dollars a barrel in July with the economic crisis hurting demand.
"Right now the message out of OPEC is mixed," said Victor Shum, senior principal at energy consultancy Purvin and Gertz in Singapore.
"I think what is likely to happen is that there will be a lot of comments to stick to full compliance (with) output cuts that have been planned and there will not be further cuts," he told AFP.
Source: Petroleumworld
Author: Ksenia Kochneva
