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Crude futures rangebound after overnight slip on US stock build

Singapore — Crude oil futures were stable in mid-morning trade in Asia Thursday, after retreating overnight from near five-month highs on the back of a surprise build in US crude stocks.

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At 10:50 am Singapore time (0250 GMT), ICE June Brent crude futures were up 7 cents/b (0.10%) from Wednesday's settle at $69.38/b, while the NYMEX May light sweet crude contract was 5 cents/b (0.08%) lower at $62.41/b.

"Crude oil futures dipped as the US EIA weekly crude oil report indicates a larger-than expected build in stockpile levels last week," Phillips Futures investment analyst Benjamin Lu said.

Data released late Wednesday by the US Energy Information Administration showed US commercial crude stocks rose 7.24 million barrels in the week ended March 29 to 449.52 million barrels. The build put inventories at a four-week high and roughly at par with the five-year average, erasing a deficit of 1.8% posted during the week before.

The build also outpaced analyst expectations. S&P Global Platts Analytics had forecast stocks to rise 3.12 million barrels in the week, while the American Petroleum Institute on Tuesday saw a 3 million-barrel build.

On the other hand, US gasoline stocks fell 1.78 million barrels over the same period to 236.84 million barrels and distillate stocks fell 1.998 million barrels to 128.17 million barrels, the EIA data showed.

Still, Lu noted: "Sharp cuts by OPEC members continue to support oil prices however as market sentiments remain robust on supply tightening in the current term."

OPEC Secretary General Mohammad Barkindo on Wednesday said OPEC and its allies would not relax their crude production quotas as the market outlook was still shaky.

"While we have seen a marked improvement in market conditions since the beginning of year [and] the market is steadily moving towards a more balanced state, we still believe we need to see inventory levels drop further," Barkindo said in a speech at the APPO Cape VII conference in Equatorial Guinea.

"We recognize that underlying risk remains, such as ongoing trade negotiations, monetary policy developments as well as the increasingly complex geopolitical challenges in various parts of the world."

OPEC, Russia and nine other non-OPEC partners are in the midst of a 1.2 million b/d production cut that has helped oil prices recover from a massive slump in the last three months of 2018.

The cut agreement is scheduled to run through June, and the coalition is divided over whether it should be extended.

Positive developments in US-China trade negotiations also buoyed sentiment in oil markets on Thursday. Larry Kudlow, director of the White House's National Economic Council, said Wednesday that talks between the two countries were "making good headway."

"More economic green shoots should sustain a positive tone for Asian markets today [Thursday]. Notwithstanding the IMF and WTO's prognosis for even slower growth than earlier expected, there are emerging signs of progress being made for US-China trade talks," OCBC analysts said in a note Thursday.

As of 0250 GMT, the US Dollar Index was down 0.05% at 96.655.

--Jin Ming Lim, jinming.lim@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com