Oil prices settled back below $60 a barrel on Wednesday as traders fret that the Organization of the Petroleum Exporting Countries, meeting this week, will leave its production targets unchanged in the face of ample crude supplies from the U.S. and concerns Iran is about to boost production. Data from a U.S. government report, meanwhile, showed a fifth straight weekly decrease in crude supplies, but production levels failed to fall despite weekly declines in the number of U.S. rigs actively drilling for oil.
July West Texas Intermediate crude fell $1.62, or 2.6%, to settle at $59.64 a barrel on the New York Mercantile Exchange. Prices saw their lowest price settlement since May 28 — just a day after marking their highest settlement of the year. Brent crude for July delivery lost $1.69, or 2.6%, to $63.80 a barrel on London’s ICE Futures exchange. Over the past five weeks, U.S. crude-oil inventories have fallen nearly 14 million barrels, but are holding near their highest levels for this time of year in at least 80 years. “As the world’s oil cartel [OPEC] is unanimously expected to make no cuts in production, it leaves the end-of-month deadline for a concrete Iranian nuclear deal the more attractive mover,” said John Macaluso, an analyst at Tyche Capital Advisors.
A final agreement with six world powers over Iran’s nuclear program is due at the end of this month. A deal would include a lift of sanctions on OPEC-member Iran and the country has said it is ready to significantly boost output if that happens. But most analysts expect OPEC to stand pat on its current output ceiling of 30 million barrels a day.
Early Wednesday, the U.S. Energy Information Administration reported a decline of 1.9 million barrels in crude supplies for the week ended May 29. Analysts polled by Platts forecast a crude-stock fall of 2.4 million barrels, while the American Petroleum Institute late Tuesday reported an increase of 1.8 million barrels. The drop in crude supplies was the fifth in a row, according to EIA data. But the report also showed that domestic oil production rose 20,000 barrels to 9.57 million barrels a day. For the lower 48 states, output was unchanged at 9.08 million. Gasoline supplies fell 300,000 barrels, while distillate stockpiles jumped 3.8 million barrels, according to the EIA.