LONDON Oil fell below $33 a barrel on Wednesday after Saudi Arabia ruled out production cuts and U.S. crude inventories rose, though a decline in U.S. gasoline stocks limited losses.
Saudi Oil Minister Ali al-Naimi said on Tuesday production cuts would not happen, though more countries would join a deal to freeze output. OPEC and non-OPEC producers who support the idea are planning a mid-March meeting, his Venezuelan counterpart said.
"Al-Naimi's remarks punctured an oil price rally that has lacked substance," said David Hufton of broker PVM. "The market correctly interpreted the presentation as bearish."
Brent crude was down 33 cents at $32.94 a barrel at 1611 GMT. U.S. crude fell 85 to $31.02. Both dropped more than 5 percent in intra-day trading on Tuesday following the Saudi comments.
The U.S. government's Energy Information Administration said on Wednesday that crude stockpiles rose 3.50 million barrels last week. Inventories on the Gulf Coast rose to the highest since at least 1990, after some refineries cut back production in response to low margins. [EIA/S]
But gasoline inventories fell for the first time since early November.
"It's a mixed bag for both bulls and bears as crude stocks continue to rise while gasoline and distillate stocks dropped," Chris Jarvis, analyst at Caprock Risk Management said.
"Overall, this week's data point will do very little to offset the Saudi oil minister throwing cold water on production cuts any time soon," he said.
Oil has slid from more than $100 a barrel 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 to boost prices.
OPEC and outside producers have stepped up diplomatic activity after prices slumped to their lowest since 2003 last month, with Saudi Arabia, Qatar, Venezuela and non-OPEC producer Russia saying on Feb. 16 that they would freeze output.
One stumbling block in attempts to forge a wider agreement is Iran, which is increasing output after the lifting of Western sanctions in January and whose oil minister was quoted on Tuesday as calling the deal "laughable".
And merely not adding more barrels to the market may have little impact on the excess supply, given that OPEC production is running at its highest in many years and increased further in January.
"At these levels, even if OPEC members honestly implement a production freeze, it will do little to improve balances in the coming months," Energy Aspects analysts said in a report.
(Additional reporting by Henning Gloystein and Ahmad Ghaddar; editing by David Goodman and David Clarke)
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Updated Date: Feb 24, 2016 23:45 PM