Iraq Works With Kurdish Company to Help Restart Two Oil Fields

Oil traders struggled to get excited about record overseas demand for U.S. crude and fuels as drillers at home boosted output by the most in half a decade.

Futures fell as much as 1.1 percent in New York. Other bullish aspects of an Energy Information Administration report, such as falling gasoline and distillate stockpiles, were also tempered by the rise in oil production and a bump up in crude inventories.

Domestic crude production bouncing back by more than Hurricane Nate had taken off the week before is depressing crude prices, according to Michael Loewen, a commodities strategist at Scotiabank in Toronto. "This is likely what’s continuing to weigh on the crude market at present."

Oil has held above $50 a barrel for the past two weeks in New York amid increasing confidence that supply cuts by the Organization of Petroleum Exporting Countries and allies including Russia will be extended beyond March. OPEC is said to be working on an exit strategy in an effort to reassure investors that the group will manage a controlled release of supplies to avoid a new glut when the curbs eventually expire.

West Texas Intermediate for December delivery slipped 51 cents to $51.96 a barrel at 12:23 p.m. on the New York Mercantile Exchange. Total volume traded was about 12 percent below the 100-day average.

Brent for December settlement declined 31 cents to $58.02 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.04 to WTI.

Stockpile Levels

Daily exports of American crude, diesel and other petroleum products climbed to a record 7.66 million barrels last week, signaling stronger demand, the EIA report showed.

In another positive sign, oil supplies at the key Cushing, Oklahoma, pipeline hub decreased for the first time since August, while gasoline supplies fell by 5.47 million barrels and distillate supplies dropped by 5.25 million barrels.

“The exports are ripping higher. That’s very good for the market,” Loewen said. “At the end of the day, crude oil demand is only one part of the equation. If you have strong products demand, that means refineries are going to buy more crude oil to create those products.”

But production in the U.S. jumped 13 percent, the most since September 2012, to 9.51 million barrels a day. And total U.S. crude stockpiles rose by 856,000 barrels following four weeks of declines, the EIA said.

“We’ve been seeing some pretty big draws and we didn’t get that this week,” Matt Sallee, who helps manage $16 billion in oil-related assets at Tortoise Capital Advisors LLC, said by telephone. However, “other than today’s surprising softness, crude has been pretty robust.”

Oil-market news:

    Iraq’s North Oil Co. is working with the Kurdish Kar Group to resume pumping at two disputed oil fields that halted output after government troops recaptured them from Kurdish forces, according to two people with knowledge of the situation

    While an extension of cuts at OPEC’s May meeting exceeded market’s expectations, the failure to make deeper output reductions was a disappointment that led to oil prices weakening, BNP Paribas SA wrote in a note, flagging the risk of history repeating itself when the cartel reconvenes next month.