Crude oil prices moved slightly lower in early Wednesday trading amid expectations of higher U.S. oil inventories, though supply-side issues were apparent.
The American Petroleum Institute reported U.S. commercial crude oil inventories increased by 833,000 barrels last week. Gains in U.S. storage are usually supportive of crude oil prices. Gasoline inventories also gained 2.3 million barrels.
Meanwhile, U.S. production is on the rise and Saudi Arabia and Russia have both signaled they could put more oil on the market later this year. In a monthly report, the International Energy Agency said it was mindful of possible disruptions from the loss of Iranian and Venezuelan oil barrels and ready to act.
“We support all efforts to minimize supply disruptions that, as history shows us, are not in the interests of either producers or consumers,” its latest reportread.
With the potential for some market relief, the price for Brent crude oil, the global benchmark, was down 0.21 percent as of 9:20 a.m. EDT to $75.72 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.59 percent to $65.97 per barrel.
Direction will be tested later in the day when the U.S. Energy Information Administration releases its inventory data. The price of oil may move lower if EIA confirms the draw reported late Tuesday by the API.
The IEA, meanwhile, cautioned that there might not be enough spare capacity available for producers to buffer any potential shock such as conflict or weather events like hurricanes in the U.S. Gulf of Mexico. A handful of producers that do have some spare production capacity may need to “go the extra mile” to protect a market that is showing early signs of a deficit in supplies.
Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in a daily emailed newsletter that means the risk for a future spike in oil prices is high.
“While the U.S. shale producers are the main reason that we have any spare capacity at all, their ability to sharply increase production in a short time to meet a supply disruption does not exist,” he said.