By May 3, 2017 Read More →

Oil prices dip on small US crude stock drop

Oil prices

Oil prices fell in trading on Wednesday after the EIA reported a smaller-than-expected drop in crude stocks and a weak demand for gasoline. Anadarko photo.

Oil prices down, gasoline inventory rises

Oil prices fell slightly in trading on Wednesday after the Energy Information Administration reported a smaller-than-expected drop in US crude inventories and weak demand for gasoline.

US WTI was down 18 cents to $47.48/barrel by 11:33 a.m. EST.  Brent crude was down by 8 cents to $50.38/barrel.

In its weekly report, the EIA released data showing US crude stocks fell by 930,000 barrels to 527.8 million, less than half the 2.3 million-barrel draw that had been anticipated.

“U.S. domestic production rose again, and continues its steady climb,” John Kilduff, partner at energy hedge fund Again Capital told Reuters. Kilduff pointed out that a sharp decline in crude imports was a factor in the inventory drawdown.

Gasoline stocks rose by 191,000 barrels, which was significantly less than the 1.3 million-barrel gain that analysts had expected.  The EIA reports gasoline demand has fallen 2.7 per cent over the last four weeks from the same time last year.

“This is continuing a trend since the beginning of the year in which sales have been lower and that is casting a shadow on the market and pressuring crude oil prices,” Andrew Lipow, president of Lipow Oil Associates told Reuters.

“Gasoline demand is going to be the story going forward.”

Investors are also watching if the participants in the OPEC supply cut deal are complying with their pledges to reduce production.

Reuters reports that as of May 1, Russia had cut its output by over 300,000 b/d since hitting peak production in October.  As a result, Moscow has hit its production reduction target one month ahead of schedule.

The latest Reuters survey shows compliance from OPEC has fallen slightly due to higher production from Angola and United Arab Emirates.  As a result, a revised report on OPEC compliance with the deal slipped from 92 to 90 per cent in March.

Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics told Reuters “Although OPEC is expected to extend a self-imposed output cap by another six months, it would be a challenge convincing several non-OPEC members to join the endeavor.”

Posted in: Energy Financial

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