Crude Oil Falls From Five-Week High on Rising Non-OPEC Output

By Gavin Evans

May 4 (Bloomberg) -- Crude oil fell from a five-week high in New York trading on speculation increased output by non-OPEC producers and weak demand may increase stockpiles.

Daily oil output in Russia, the world’s second-largest producer, gained about 49,000 barrels in April, the nation’s Energy Ministry said May 2. New York oil futures gained 3.2 percent last week as equity markets rallied and reports showed manufacturing improved in the U.S., Japan and China.

“Some of these leading indicators have been reasonably encouraging, but that inventory over-hang is going to do a lot to stifle any rallies,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney.

Crude oil for June delivery fell as much as 58 cents to $52.62 a barrel in after-hours electronic trading on the New York Mercantile Exchange and was at $52.83 at 9:53 a.m. in Sydney. The contract jumped 4.1 percent to $53.20 a barrel on May 1, the highest settlement since March 26, after the Reuters/University of Michigan U.S. consumer sentiment index rose for a second month and an index of manufacturing reached a seven-month high.

New York oil futures gained 5.8 percent in the past two weeks as rising global equity markets and improved industrial production in China and Japan bolstered investor confidence. Prices are up 19 percent this year.

Rising Stockpiles

Still, crude-oil supplies in the U.S., the world’s largest user of the commodity, rose for an eighth week to 374.7 million on April 24, the Energy Department reported last week. The gain left inventories at the highest level since September 1990 and 15 percent above the five-year average for the period.

Stockpiles rose even as April output from Alaska, the country’s second-largest producing state, fell 10.2 percent from a month earlier after a volcanic eruption. Production from Prudhoe Bay, the biggest U.S. oil field, fell 15 percent from March, a May 1 government report showed.

“It is difficult to see a sustained rally in oil given the inventory status,” Hassall said.

Brent crude oil for June settlement fell 24 cents, or 0.5 percent, to $52.61 a barrel on London’s ICE Futures Europe exchange today. Brent rose 4 percent to 52.85 a barrel on May 1 and is up 15 percent this year.

Prices have also gained as the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world’s oil, has reduced output in line with cuts agreed last year.

Daily exports from Iraq, the only OPEC nation not restricted by quota, increased by 5,000 barrels to 1.821 million last month, according to the state-run oil marketing company. Shipments may rise as much as 4 percent to 1.9 million this month, Falah Al-Amri, head of the agency, said yesterday.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net