Brent Crude Falls as U.S. Supplies Increase, OPEC Cut Unlikely
June 5 (<a href=quote.bloomberg.com>Bloomberg) -- Brent crude oil fell a second day in London after a U.S. Energy Department report showed a larger-than- forecast weekly gain in crude-oil inventories, amid expectations OPEC probably won't cut output quotas next week.
U.S. supplies rose 2.8 million barrels to 289 million, the department said yesterday, more than the 350,000-barrel gain that was the average expected by nine analysts in a Bloomberg survey. Most analysts said OPEC won't change output quotas next week because it's too soon to gauge how much oil Iraq may soon export.
If there is no OPEC cut I think you'll see the bull run ending, Brent has risen a lot recently,'' said Bruce Evers, an analyst at Investec Henderson Crosthwaite in London. OPEC will want to wait and look at Iraqi exports, there's no real need to do anything yet.''
Brent crude for July settlement fell as much as 46 cents, or 1.7 percent, and was down 34 cents at $26.47 a barrel in early open- outcry trading on London's International Petroleum Exchange at 10:31 a.m. London time. Prices rose 11 percent last month, buoyed by optimism about U.S. summer demand for gasoline and earlier expectations for a cut in supplies from the Organization of Petroleum Exporting Countries .
On the New York Mercantile Exchange, crude oil for July delivery was down 32 cents at $29.73 a barrel in after-hours electronic trading. New York prices fell 2 percent yesterday to $30.05.
It was always a big ask for it to stay above $30,'' said David Thurtell, commodities strategist at Commonwealth Bank of Australia in Sydney. The risk was always that stocks would rebound, which they have.''
`Wall of Crude'
U.S. crude oil inventories gained for a third week as imports jumped close to a record, the Energy Department report showed. Imports leapt to 10.5 million barrels a day, the highest since a record in April. U.S. gasoline inventories also rose, reversing most of the prior week's decline.
The long-awaited wall of crude is arriving,'' said Deborah White, commodities economist at Societe Generale in Paris. Saudi crude arrivals are holding up and Venezuela's, targeted at U.S. Gulf Coast refiners, have increased significantly.''
OPEC meets June 11 in Doha, Qatar, to consider whether to cut output because of the resumption of Iraqi oil exports, which were halted when the U.S.-led invasion in March.
Iraq has begun resuming exports with a tender to sell 2 million barrels of Basrah Light crude oil stored at its southern port and 8 million barrels of Kirkuk crude oil held at the Turkish port of Ceyhan, according to a statement distributed in Baghdad.
Delivery is between June 17 and 30, and bids are to be submitted by 5 p.m. London time on June 10. Preference will be given to oil refiners, the statement said.
``We have already received a lot of interest,'' said Mohammed Al Jibouri, the director-general of Iraq's State Oil Marketing, in an interview in Baghdad.
OPEC
Iraq pumped about 2.5 million barrels of oil a day before the war, or about 3 percent of world supply.
OPEC should keep quotas unchanged and only cut them when Iraqi supply reaches pre-war levels, OPEC President Abdullah bin Hamad al- Attiyah said in an interview this week. Iraq may pump that much by September, according to U.S. officials.
Iraqi officials in Baghdad ``are talking about clearing inventory at Ceyhan as a one-off tender but you still have major issues over (oil) quality and the state of the infrastructure, pipelines and so on,'' before there's a constant flow of exports, Investec Henderson's Evers said.
Even without a formal cut in quotas, Saudi Arabia may reduce the extent to which its exceeding its OPEC quota if prices begin falling fast, Evers said. Saudi Arabia pumped 9.1 million barrels a day last month, which was 14 percent greater than its quota for that month, and 10 percent more than a new lower quota that took effect June 1.
``I think you will see the Saudis cutting back some, without any song and dance,'' he said.