Crude oil rallies in late-day surge, settles almost 2% higher

WTI and Brent Crude Oil

CRUDE prices trended lower on Thursday after the Energy Information Administration (EIA) reported a weekly build in crude oil inventories at 6.8 million barrels.

That trumped an earlier reading from the American Petroleum Institute that suggested stockpiles rose by 3.5 million barrels in the week.

Basically, rising USA production is more than offsetting the strategy from OPEC and its allies, and if we consider the potential negative impact of the trade war on future demand, prices are likely to continue lower until supply and demand reach a balance point.

The OECD's leading economic indicator has fallen to its lowest for nearly a decade and is at a level that since 1970 has always signalled an imminent recession.

Brent crude futures were up 13 cents to $60.76 a barrel by 12:25 p.m. EDT (1625 GMT), while US West Texas Intermediate crude futures gained 2 cents to $51.70 a barrel.

Brent futures sank as low as $59.45, also its lowest since mid-January.

Over and above that, USA crude production hit new record highs of 12.4 million barrels per day.

"Obviously it's more than enough to satisfy demand by a lot and just makes for a really bearish report across the board".

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The combination of slower supply growth from US shale and continued restraint by Saudi Arabia and its allies should eliminate the prospective oversupply of oil later in 2019 and 2020.

Producers are concerned that the economic slowdown will reduce fuel consumption.

"Yesterday's upswing on the back of rising stock markets was halted by an unexpectedly sharp rise in U.S. crude oil and product stocks", Commerzbank said.

"So that's going to be the next level to watch".

Saudi Arabia's Minister of Energy, Industry and Mineral Resources, Khalid A. Al-Falih, indicated that the oil cartel would continue to sustain market stability beyond June, pointing to continuous output reduction.

Global oil prices are expected to teeter for the remainder of the year, as trade tensions and US crude inventories buildup continue to incur losses, yet output cut efforts by OPEC and its allies (OPEC+) would underpin the market, according to analysts at the world's leading investment banks.

However, on Tuesday, the head of Russian state producer Rosneft, Igor Sechin, said Russia should pump at will and he would seek compensation from the government if cuts were extended.

"While much attention has been paid to a rising and record pace of USA crude production in contributing to the strong crude supply hike.it is becoming increasingly apparent to us that a softening in demand has also been a major contributor", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

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