Oil below $37 as record U.S. inventories overshadow output freeze plan

A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin A worker checks the valve of an oil pipe at the Lukoil company owned Imilorskoye oil field outside the West Siberian city of Kogalym, Russia, January 25, 2016. REUTERS/Sergei Karpukhin

By Alex Lawler

LONDON (Reuters) – Oil fell further below $37 a barrel on Wednesday as U.S. crude stockpiles rose to a new record, underlining the extent of a supply glut and countering support from producer efforts to tackle it.

Crude inventories rose by 10.4 million barrels, the U.S. government’s Energy Information Administration (EIA) said in its weekly report released at 1530 GMT (10:30 a.m. EST), much more than analysts had expected. [EIA/S]

Global benchmark Brent crude <LCOc1> was down 45 cents at $36.36 a barrel by 1548 GMT (10:48 a.m. EST). On Tuesday, it reached $37.25, the highest in almost two months. U.S. crude <CLc1>, also known as WTI, was down 55 cents at $33.85.

“Today’s EIA data will do very little to help oil’s recent bounce,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.

“In short, it’s difficult to make a bullish case. Signs that the glut in oil and reversal of the building trend will subside any time soon seems distant.”

The inventory rise was even larger than the 9.9 million-barrel increase reported on Tuesday by industry group the American Petroleum Institute (API). The API report had weighed on prices earlier in the session.

Brent has risen 34 percent from a 12-year low of $27.10 hit on Jan. 20, adding to expectations that further declines may not be on the cards. An analyst at the International Energy Agency said on Tuesday prices appeared to have bottomed.

Crude has collapsed from more than $100 in mid-2014, pressured by excess supply and a decision by the Organization of the Petroleum Exporting Countries to abandon its traditional role of cutting production by itself to boost prices.

After more than a year of failing to agree any steps, OPEC and outside producers have stepped up diplomatic activity to fix the supply glut. Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia said on Feb. 16 they would freeze output.

The four countries have agreed to meet again in mid-March, Venezuelan Oil Minister Eulogio Del Pino said last week. The location for the talks has yet to be decided, OPEC delegates say.

In an early sign that Moscow will stick to the plan, Russia reported its oil output was little changed in February and oil company Rosneft <ROSN.MM> is even floating the idea of a domestic production cut, two industry sources said.

Saudi Arabia has yet to report its production, but a Reuters survey this week found no sign of an increase in February. <OPEC/O>

(Additional reporting by Barani Krishnan in New York and Osamu Tsukimori in Tokyo; Editing by Dale Hudson and Susan Fenton)

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