By Sonali Paul and Koustav Samanta
MELBOURNE/SINGAPORE (Reuters) – Oil prices plunged on Thursday after U.S. industry data showed a surprise steep build in crude oil inventories, dampening hopes of a smooth recovery in demand as some countries begin to ease their way out of coronavirus lockdowns.
The decline in oil benchmarks extended losses from Wednesday over uncertainty about Russia’s commitment to deep output cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, a grouping dubbed OPEC+.
U.S. West Texas Intermediate (WTI) crude futures were down 3%, or 98 cents, at $31.83 a barrel at 0709 GMT. The U.S. futures slipped earlier as much as 5% to a low of $31.14.
Brent crude futures were down 2%, or 71 cents at $34.03 per barrel, after dropping to as low as $33.63.
“The rise in API (American Petroleum Institute) inventories was very much unexpected and means this evening’s U.S. EIA crude inventories will be monitored closely. That appears to be weighing on sentiment in Asia,” said Jeffrey Halley, senior market analyst at OANDA.
Data from industry group API showed U.S. crude stocks rose by 8.7 million barrels in the week to May 22, compared with analysts’ expectations for a draw of 1.9 million barrels.
“With the oil market assumed to be rebalanced at a much quicker pace than anyone expected, investors are now attempting to digest the outcome of the upcoming OPEC+ meeting,” said Stephen Innes, chief global markets strategist at AxiCorp.
“As is often the case during a run-up up an OPEC+ meeting, the focus is squarely on Russia’s commitment and understandably so as historically they have been the laggard within the OPEC+.”
With WTI holding above $30 a barrel, OPEC+ will be closely watching to see whether U.S. shale oil producers, who have breakeven prices in the high $20 and low $30 dollar range, step up production, National Australia Bank’s head of commodity research, Lachlan Shaw said.
(Reporting by Sonali Paul in Melbourne and Koustav Samanta in Singapore; Editing by Richard Pullin, Kenneth Maxwell and Tom Hogue)