Oil hit by broader market downdraught, U.S. output rise also weighs


Asian imports of 726,600 bpd of USA crude in November and January's 676,190 bpd were the strongest two months on record, showing that the region's traders were quick to take advantage of the weakening of WTI relative to Brent.

Gary Cohn, economic adviser to US President Donald Trump, seen as a bulwark against protectionist forces within the government, said on Tuesday he was resigning, triggering a more than 1% fall in S&P 500 futures on Wednesday.

Brent had dipped closer to $US65 in earlier trading, pressured by the International Energy Agency's (IEA) warning on Monday that USA oil output was set to surge over the coming five years.

US West Texas Intermediate (WTI) crude futures were at US$61.16 a barrel, up 1 cent, or 0.02 per cent. WTI also fell by more than 2 per cent the previous session.

Tanker rates from the United States to Asia have also been rising recently, with the cost of shipping a tonne of oil from Houston to China TC-HOU-DLC assessed by Thomson Reuters at $29.01 on March 2, up from $18.44 at the start of February and $16.79 in late September a year ago.

United States output has also dented sentiment.

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"Oil fundamentals have been showing signs of weakening", said Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen.

A voice for Wall Street in the White House, Cohn's resignation came after he lost a fight over Trump's plans for hefty steel and aluminium import tariffs.

The prospect of the Organization of the Petroleum Exporting Countries and non-member producers, including Russian Federation, maintaining crude output cuts in the face of a boom in US shale production helped lift Brent back above $65 a barrel this week. The EIA said weekly U.S. crude production hit a record high per day last week of nearly 10.4 million barrels.

Crude inventories rose by 2.41 million barrels, lower than expectations.

With US output outpacing demand growth, analysts say the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation, who together with some other producers have been withholding production in order to prop up prices, are under pressure to keep up the supply restraint, even at the cost of market share. Last year, the United States surpassed Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries.

The U.S. Energy Informational Administration released its short-term forecast Tuesday, forecasting Brent spot prices will average about $62 barrel in 2018 and 2019 compared with an average of $54 per barrel in 2017.