Oil. Picture: REUTERS
Oil. Picture: REUTERS

Tokyo/Singapore — Oil prices fell on Wednesday after industry data showed an increase in US crude inventories and as Saudi Arabia pledged to keep markets balanced.

However, analysts said oil markets remained tight amid supply cuts led by producer group Opec and as political tension escalates in the Middle East.

Brent crude futures were down 36 cents, or 0.5%, at $71.82 a barrel by 4.14am GMT.

US West Texas Intermediate (WTI) crude futures for July delivery were down 49 cents, or 0.8%, at $62.64. The June contract expired on Tuesday, settling at $62.99 a barrel, down 11 cents.

The American Petroleum Institute (API) said on Tuesday that US crude stockpiles rose by 2.4-million barrels last week, to 480.2-million barrels, compared with analysts’ expectations for a decrease of 599,000 barrels.

Official data from the US Energy Information Administration’s oil stockpiles report is due later on Wednesday.

Outside the US, Saudi Arabia on Wednesday said it was committed to a balanced and sustainable oil market.

Saudi Arabia has been at the forefront of supply cuts led by Opec, of which the kingdom is the de facto leader, which began in January and are aimed at reducing global oversupply.

Because of the cuts, Bank of America Merrill Lynch said crude output by Opec and its allies fell by 2.3-million barrels per day (bpd) between November 2018 and April 2019. That has helped push up Brent crude prices by more than a third since the start of the year.

The bank said some of the impact of the cuts was offset by a slowdown in global oil demand growth due to trade tensions to just 0.7-million bpd in the fourth quarter of 2018 and the first quarter of 2019, versus a five-year average of 1.5-million bpd.

Despite the slowdown, US bank Morgan Stanley said it expects Brent prices to trade in a $75-$80 per barrel range in the second half of 2019, pushed up by tight supply and demand fundamentals.

Beyond market fundamentals, oil traders are eyeing the tensions between the US and Iran.

US President Donald Trump on Monday threatened Iran with “great force” if it attacked US interests in the Middle East.

On Tuesday, acting US defence secretary Patrick Shanahan said threats from Iran remain high.

Tensions have risen since Trump reimposed sanctions on Iranian oil exports to try to strangle the country’s economy and force Tehran to halt its nuclear programme.