Oil prices steady despite U.S. crude inventory build

Oil prices were little changed on Wednesday even after U.S. government data showed a surprise increase in crude inventories, as OPEC-led output cuts and U.S. sanctions kept the supply outlook tight enough to hold futures near five-month highs.

Brent futures were unchanged at $69.37 a barrel by 11:00 a.m. EST (1500 GMT). Their session high was $69.96, the highest since Nov. 12, when they traded above $70.

U.S. West Texas Intermediate crude fell 2 cents to $62.56, having briefly hit $62.99, the highest since Nov. 7.

U.S. crude stocks rose to 7.2 million barrels in the latest week, the Energy Information Administration said, surprising analysts who had forecast a decrease of 425,000 barrels.

“Even though this is a shockingly bearish number on the headline, the fact that a lot of people will figure out shortly that this is probably a number that’s going to be reversed very quickly would mean that the downside selling should be limited,” said Phil Flynn, an analyst at Price Futures Group in Chicago.

“I don’t think this is going to be a back-breaker for the bulls by any stretch of the imagination.”

Crude stocks at the Cushing, Oklahoma, delivery hub rose by 201,000 barrels, EIA said.

Commerzbank said in a note that the EIA could further revise down U.S. production. The agency last put January output at 11.9 million bpd, down 100,000 bpd from the previous month.

Oil prices have been supported by efforts by the Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia to withhold around 1.2 million barrels per day (bpd) of supply this year.

Supply from OPEC countries hit a four-year low in March, a Reuter’s survey found this week.

Oil production from Russia fell to 11.3 million bpd last month, but missed the country’s target under the supply deal.

“We assume that OPEC crude oil production will average 30.1 million bpd in 2019 … down from 31.9 million bpd in 2018,” BNP Paribas said in a note, reducing an earlier forecast for this year by 200,000 bpd.

In a sign that supply may tighten further, a U.S. official said on Tuesday that three of eight countries granted waivers by Washington to import oil from Iran had cut such purchases to zero, adding that improved oil market conditions would help reduce Iranian crude exports further.