The crude oil dock at the Port of Corpus Christi in Texas. Picture: REUTERS
The crude oil dock at the Port of Corpus Christi in Texas. Picture: REUTERS

Tokyo/Sydney — Oil prices dropped on Thursday as the impact of plentiful US production offset a surprise decline in US inventories, leaving international benchmark Brent retreating from a five-month high touched in the previous session.

Brent crude futures were at $71.42 a barrel at 2.35am GMT, down 20 cents, or 0.3%, from their last close. Brent fell 0.1% on Wednesday, after earlier touching its highest since November 8 at $72.27 a barrel.

US West Texas Intermediate (WTI) crude futures were at $63.69 per barrel, down 7 cents, or 0.1%, from their previous settlement. WTI closed the last session down 0.5%.

US crude inventories fell by 1.4-million barrels in the week to April 12, compared with analyst expectations for an increase of 1.7-million barrels, department of energy figures showed on Wednesday.

“A persistent rise in US oil output, together with lingering demand-side concerns emerging from the US-China trade dispute, is limiting price gains,” said Abhishek Kumar, head of analytics at Interfax Energy in London.

While official data on Wednesday showed China’s economy grew by 6.4% in the first quarter, defying expectations for a further slowdown, talks on a US-China trade deal have yet to bear fruit.

While the US-China trade war has rumbled on, prices have been supported in 2019 by an agreement reached by the Organisation of the Petroleum Exporting Countries (Opec) and allies, including Russia, to limit their oil output by 1.2-million barrels per day.

Global supply has also been tightened further by US sanctions on Opec members Venezuela and Iran.

Iran’s crude exports have dropped in April to their lowest daily level in 2019, tanker data showed and industry sources said, suggesting a drawdown in buyer interest ahead of expected further pressure from Washington.

Surging US production has filled some of the gap in supplies, though not all of the lost production can be immediately replaced by US shale oil due to refinery configurations.

“The unexpected drawdown in US commercial crude oil stocks was balanced by lower-than-expected withdrawals in the country’s gasoline and distillate inventories,” Kumar said.

Gasoline stocks fell by 1.2-million barrels, less than analysts’ expectations in a Reuters poll for a 2.1-million-barrel drop.

Distillate stockpiles, which include diesel and heating oil, fell 362,000 barrels, also not as much as forecasts for a 846,000-barrel drawdown, the Energy Information Administration data showed.

Net US crude imports fell last week by 659,000 barrels per day.