Oil slips on worries about rising U.S. crude stockpiles
(10/12/2017 2:18:00 PM)
Oil prices fell Thursday following a report showing an increase in U.S. crude stockpiles last week — another sign that the market’s recovery will be slower than expected.
Brent crude LCOZ7, -1.16% , the global benchmark, was down 0.4% to $56.71 a barrel in London midmorning trading on the Intercontinental Exchange.
On the New York Mercantile Exchange, West Texas Intermediate futures CLX7, -1.50% , the U.S. price gauge, fell 0.7% to $50.95 a barrel.
The fall in prices came after the American Petroleum Institute said late Wednesday that domestic crude inventories rose by 3.1 million barrels. The data was released ahead of official numbers from the U.S. Energy Information Administration on Thursday and was in contrast to a 1.7 million barrel decline projected by analysts in a Wall Street Journal survey.
Also Thursday, the International Energy Agency said global oil supply rose in September, while demand growth slowed.
Investors continue to focus on U.S. oil supplies as a bellwether for the global glut that has pressured the market since 2014 and driven prices to below $30 a barrel in 2016.
On Wednesday, the EIA forecast total U.S. crude oil production would average 9.2 million barrels a day in 2017 and 9.9 million barrels a day in 2018, which would mark the highest annual average production in U.S. history.
While other major producers, including members of the Organization of the Petroleum Exporting Countries, have cut their output in a bid to raise prices, U.S. producers are expected to continue drilling. That, market watchers say, will put a cap on any price rallies.
“It will probably be hard for a well-supplied market…to move significantly higher from here,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.
Global oil supply growth in September was mainly driven by production in the U.S., despite disruptions caused by the hurricane season, as well as output in the North Sea and Kazakhstan, the IEA said in its closely watched monthly report. The agency estimates that global production rose by 90,000 barrels a day last month from August, to 97.5 million barrels a day.
“Well completions at U.S. shale oil fields have picked up from the low levels seen at the start of the year, so that even though new rig additions have stalled, output continues its upward trend,” the IEA said.
The IEA said OPEC’s output was unchanged in September. The agency said OPEC and other producers outside the group like Russia have largely held to an agreement last year to withhold almost 2% of global oil supply from the market. The IEA estimated that OPEC’s compliance with the deal stood at 86% in 2017.
However, the big question hanging over the market is whether the producers will extend their agreement when it runs out in March. Analysts say that an unwieldy exit could flood the market with crude as producers open the taps.
Officials from Russian and Saudi Arabia, the architects of the deal, have signaled they are ready to extend the deal beyond March, but no agreement has been reached yet. OPEC, Russia and other allied producers will meet on Nov. 30.
Among refined products, Nymex reformulated gasoline blendstock RBX7, -0.68% — the benchmark gasoline contract — was down 0.1% at $1.61 a gallon.