May 23, 2018

Oil prices decline on rising USA stockpile

18 November 2017, 12:30 | Kenneth Drake

Oil prices decline on rising USA stockpile

Oil rises amidst expected extension of OPEC cuts

The West Texas Intermediate for December delivery was down 0.37 US dollar to settle at 55.33 dollars a barrel on the New York Mercantile Exchange, while Brent crude for January delivery lost 0.34 dollar to close at 61.87 dollars a barrel on the London ICE Futures Exchange.

On Wednesday, the U.S. Energy Information Administration reported that crude inventories rose by 1.9 million barrels in the week ended November 10, a surprise build compared with analyst forecasts. Prices fell 37 cents to $55.33 on Wednesday.

Early yesterday, Brent crude, the worldwide benchmark dropped to $61 from the $64 recorded on November 7.

Oil prices fell on Wednesday, as increasing crude stockpiles and record high US production reignited worries about an oversupplied market. The American Petroleum Institute on Tuesday had reported a 6.5 million-barrel climb, according to sources.

Hedge funds and other speculative investors are more bullish than they've been in more than six months, according to data from the Commodity Futures Trading Commission.

Oil prices decline on rising USA stockpile
Oil prices decline on rising USA stockpile

As prices rise, "that can only encourage more and more USA production coming on board", said Tariq Zahir, managing member of Tyche Capital Advisors. This week's US oil rig count data, an early indicator of future output, is due at 1 p.m. Signs of rising USA output have dampened the impact of the deal restricting output agreed by the Organization of the Petroleum Exporting Countries (OPEC), Russia and several other producers.The agreement expires in March and was expected to be extended at OPEC's next meeting on November 30. The S&P Global Platts survey forecast supply declines of 1 million barrels for gasoline and 2 million barrels for distillates.

IEA reduced its oil demand growth forecast by 100,000 barrels per day (bpd) for 2017 and forecast 1.3 million bpd oil demand for 2018.

OPEC is expecting that inventories would rapidly go down by 670,000 barrels a day through the year if they maintain the supply limit. "Brent would break back below US$60 a barrel".

"It's no surprise that US production has edged higher given the higher oil prices", said Barnabas Gan, an economist at Oversea-Chinese Banking Singapore. This "is likely to once again result in builds in broader petroleum inventories", Mr. Loewen wrote on Tuesday.

Distillate stockpiles, which include diesel and heating oil, fell by 799,000 barrels, versus expectations for a 1.3 million-barrel drop, the EIA data showed. Refinery utilization rates rose by 1.4 percentage points.

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