published Feb 15th 2017, 2:34 pm, by Mark Shenk

(Bloomberg) —
Oil closed near $53 a barrel as record U.S. inventories tempered the impact of OPEC’s production cuts.

American crude supplies climbed 9.53 million barrels to 518.1 million, the highest level in weekly data going back to 1982 and more than twice the 3.5 million-barrel gain forecast by analysts surveyed by Bloomberg before a government report Wednesday. Gasoline stockpiles also rose to a record, while refinery oil demand slipped as seasonal maintenance was performed. Saudi Arabia told OPEC that it cut output last month by the most in eight years, more than it pledged under a deal to curb supply, the group’s monthly market report on Monday showed.

Oil has traded above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other countries started trimming supply on Jan. 1. OPEC’s secondary source estimates indicate that the 11 members subject to the accord are achieving more than 90 percent of the agreed cuts. The price gains are funding a revival in U.S. shale drilling that’s countering the efforts of OPEC and its biggest producer Saudi Arabia.

“We would expect crude inventories in the U.S. to increase for about four-more weeks before starting to drop,” Matt Sallee, who helps manage $17.1 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas. “The middle of March is when we expect inventories to turn lower here as the OPEC cuts are felt and refineries come back.”

West Texas Intermediate for March delivery slipped 9 cents to settle at $53.11 a barrel on the New York Mercantile Exchange. Total volume traded was about 8 percent below the 100-day average.

Brent for April settlement decreased 22 cents to $55.75 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.15 premium to April WTI.

OPEC’s January output still isn’t low enough to bring the oil market back into balance, let alone clear an inventory surplus the group estimates at about 300 million barrels, data from the group’s Monday report indicate.

OPEC Basket

“It looks like traders are putting all their eggs in the OPEC basket,” Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $133 billion of assets, said by telephone. “There’s still a consistent speculative bias to the upside. The present fundamentals are being ignored.”

The Energy Information Administration revised historical weekly figures in October to remove so-called lease condensates. Monthly data going back to 1920 was only revised back to 2005.

Refineries nationwide used 15.5 million barrels a day of crude last week, the lowest since October. Refiners typically plan maintenance programs for low-demand periods such as February when there’s a lull between winter preparations and the summer surge of gasoline consumption.

“The builds are probably explained by increased OPEC output at the back of the year and refinery maintenance,” Adam Wise, who helps run a $7 billion oil and natural gas bond and private equity portfolio at John Hancock in Boston, said by telephone. “The coming weeks will be telling as we start to see the effects of the OPEC cuts as imports fall.”

Oil-market news:

Occidental Petroleum Corp. is working with Citigroup Inc. to handle the sale of about 180,000 acres of exploration and production assets near the Mexican border in South Texas, people familiar with the plans said. Nigeria’s Bonga oil field will shut down for about 36 days from Feb. 23 for maintenance, according to a schedule seen by Bloomberg. Kuwait is sticking with plans to add half a million barrels a day of oil-output capacity as it prepares for the eventual expiration of the OPEC output quotas, the head of Kuwait Oil Co. said. Libya’s crude production exceeded 700,000 barrels a day and is due to keep rising as working conditions in the conflict-ridden country improved, an official from the state oil company said.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Carlos Caminada, Michael Jeffers

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