Oil prices fall as rising U.S. inventories reassert supply concerns

By Sonali Paul
MELBOURNE, May 6 (Reuters) - Oil prices fell on Wednesday,
ending a multi-day streak of gains, as investors focused on
oversupply risks after U.S. crude inventories rose more than
expected amid a slump in demand caused by restrictions to halt
the coronavirus spread.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
as much as 2.1% to $24.05 a barrel and were down 14 cents at
$24.41 a barrel at 0201 GMT. WTI has snapped a five-day winning
streak.
Brent crude LCOc1 futures were flat at $30.97 a barrel.
Brent prices climbed 13.9% in the previous session, part of
a six-day rise. Investors may be hesitant to increase their
purchases of Brent as the contract has climbed too much over the
past streak.
Brent's relative strength index, a technical measure used to
track the future's trading momentum, was at 72.93 on Wednesday,
indicating it is overbought after the recent gains.
WTI also slipped after a report showed U.S. crude
inventories rose 8.4 million barrels last week, more than
expected, according to data from the American Petroleum
Institute late on Tuesday. Oil prices had gained recently as European and Asian
countries had ended their lockdowns to halt the coronavirus
spread and as producers had axed supply after the demand crunch.
But analysts cautioned the rebalancing of the market would be
choppy.
"We're talking about normalisation of supply and demand but
we've got a long way to go," said Lachlan Shaw, National
Australia Bank's head of commodity strategy.
"There are a lot of supply cuts that have come through. That
combined with some early signs of demand lifting has meant the
rate of inventory build is slowing."
But analysts also pointed to comments by U.S. shale producer
Diamondback Energy FANG.O saying it would consider reviving
drilling plans if WTI held above $30 a barrel as a sign that
producers will not want to shut in production for long.
"When (prices) start to hold on to those gains, there'll be
a point where producers start to reverse those well shut-ins,"
Shaw said.
Gasoline stocks in the U.S., the world's biggest producer
and consumer of oil, fell by 2.2 million barrels, API reported,
compared with analysts' expectations in a Reuters poll for a
43,000 barrel increase, and refinery crude runs rose.
Traders will be looking for further confirmation of the
inventory data when the Energy Information Administration comes
out later on Wednesday.