By Barani Krishnan
Investing.com - It's a case of two oils, and which could be better for the bulls as U.S. crude prices struggle after a stockpile surge while those of Brent continue their ascent on Saudi Arabia's supply squeeze.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, halted its advance in the $65 per barrel territory while London-traded Brent smashed new frontiers above $75.
WTI settled down 68 cents, or 1.03%, to $65.21 per barrel. It was the second day of declines for the benchmark U.S. crude, which is now off 2.1% from a $66.60 peak on Tuesday.
Brent ended down 22 cents, or 0.3%, at $74.35. The fall came even as Brent earlier in the session had hit a six-month high of $75.59. That was on news that Poland and Germany had rejected crude oil from Russia over quality issues, Reuters reported.
For the week, the U.S. crude benchmark is now up 1.8%, while its U.K. rival is still 3.3% ahead on the week. Year to date, though, WTI has risen 43.6%, and Brent has gained 38.2%, largely on output cuts by Saudi Arabia, Russia and other oil producers in the OPEC cartel.
Whatever the divergence between WTI and Brent now, the path of least resistance in oil is expected to be higher as the U.S. driving season kicks into high gear for the summer, pushing pump prices higher. AAA said Thursday its national average retail price for gasoline was $2.877 a gallon, up 27% for the year.
The outlook for WTI has come under a cloud since the Energy Information Administration reported on Wednesday that crude inventories in the United States rose by 5.5 million barrels last week, about five times more than expected.
U.S. crude stockpiles have risen in three of the past four weeks, adding nearly 23 million barrels in that stretch and raising the year-on-year surplus to above 62 million barrels.
Brent's fundamentals versus WTI, meanwhile, improved after Saudi Energy Minister Khalid al-Falih reinforced to the market on Wednesday what many had already anticipated: Riyadh will continue exporting its oil in dribs and drabs to starve the global market of supply in the aftermath of the Trump administration's total ban on Iranian oil.
Falih said any output increases made by Saudi Arabia and OPEC would be need-based, coming directly from customers willing to pay prices asked by producers, and not preemptively to fill lost Iranian barrels or other supply impacted by separate U.S. sanctions on Venezuela and unplanned outages in Libya. Falih's remarks appeared aimed at hedge funds, which were expected to continue pushing oil prices up so long as OPEC maintained its rhetoric of cuts.
Even so, some analysts were skeptical of how much more consumers would be willing to pay, as lofty projections of $90 and above have returned for Brent, and dark clouds gather again over the global economy. Saudi Arabia has been interested in crude moving to $80 a barrel or higher.
"Saudi Arabia is trying to be smart about oil prices. But we have been there before, and in three months we will wake up to a slowdown of oil demand," said Oliver Jakob, founder of Zug, Switzerland-based oil consultancy PetroMatrix.