Oil prices dropped on Thursday, reversing gains in the previous session, on concern over whether major crude producers will be able to agree to extend record output cuts, heightened by worries over a huge build in U.S. distillate inventories.
Brent crude LCOc1 futures fell 1.46%, or 58 cents, to $39.21 a barrel as of 0459 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 futures slid 1.98%, or 74 cents, to $36.55 a barrel, as reported by Reuters.
Saudi Arabia and Russia, two of the world's biggest oil producers, have agreed to support extending into July the 9.7 million barrels per day (bpd) in supply cuts backed in April by the OPEC+ group, comprised of the Organization of the Petroleum Exporting Countries and other major producers.
But they failed to agree on holding an OPEC+ meeting on Thursday to discuss the cuts, with OPEC sources saying it would be conditional on countries that have not complied with their targets so far deepening their cuts.
Further, Saudi Arabia and other Gulf producers Kuwait and the United Arab Emirates are not planning to extend voluntary additional output cuts of 1.18 million bpd after June, indicating crude supply could rise next month no matter what OPEC+ decides.
U.S. Energy Information Administration data on Wednesday showed gasoline stocks rose by 2.8 million barrels, nearly triple what analysts had expected, while distillate stocks rose by 9.9 million barrels, or nearly four times more than expected.
Overall demand for diesel and similar fuels is down 13% from the year-ago period over the last four weeks. Gasoline product supplied, a proxy for demand, picked up last week, but the four-week average still shows a 23% drop from the year-ago period.