Oil Drops as U.S. Stockpiles Report Stokes Fears of Supply Glut

Oil falls as trade worries mount Saudi comments limit losses

The Energy Information Administration (EIA) said that the USA crude production increased to a record 124.4 million barrels per day in the week to May 31, a growth of 1.63 million barrel per day since May 2018. Brent for August settlement fell $1.34 a barrel, or 2.2 per cent, to settle at $60.63 in NY.

U.S. West Texas Intermediate crude fell to a session low of $50.66 after the report, the lowest level since January 15.

U.S. Crude Oil WTI Futures were at $51.85 per barrel at 1:26 AM ET (05:26 GMT) after dipping to $51.31 earlier on Thursday.

U.S. crude settled 22 percent lower than its April peak after tumbling as much as 5.4 per cent. Brent sank to the lowest since January.

Though demand for oil is still up on a global level, economic concerns are also growing.

Brent crude futures settled at $61.67 a barrel, gaining $1.04, or 1.7%.

After languishing near their lowest level since mid January and struggling to move higher for much of the trading session, crude oil futures eventually managed to settle on a positive note on Thursday.

Trump threatened on May 30 to impose a 5-percent tariff on Mexican products as of June 10 and gradually increase the figure to 25 percent in October if Mexico does not stop the flow of illegal migration that reaches its border with the United States.

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"We could be looking at crude going down and testing some of the support levels" of the January lows, Marshall Steeves, energy markets analyst at Informa Economics in NY, said in an interview.

Meanwhile, weekly USA oil production ticked up to an all-time high 12.4 million bpd, according to a preliminary reading from EIA. The report also showed a 208,000 barrels increase in gasoline supply last week while distillate stockpiles declined by 1.08 million barrels.

Oil prices were already under pressure from fears of slowing global growth due to US trade conflicts.

But on Thursday oil prices followed US equities higher after Bloomberg News reported that the United States may delay tariffs on goods from Mexico as talks continue.

The so-called OPEC+ alliance has been withholding supply since the start of the year in order to drain oversupply and prop up prices.

Oil prices rose almost 3% on Friday, climbing further from five-month lows hit this week, after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June and as Wall Street rallied. The group plans to decide later this month or in early July whether to continue the supply curbs.

U.S. West Texas Intermediate and global benchmark Brent crude oil futures are trading higher on Thursday after posting a steep sell-off the previous session. An extension of oil production output would be considered says Deputy Prime Minister Anton Siluanov of Russian Federation.

Saudi Arabia has cut supply by more than required by the OPEC+ deal in a bid to stop inventories building up.

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