Oil prices steady after jump in US crude exports to 2 million b/d

Oil prices dipped on Wednesday on reports of increased US crude production and exports. Reuters file photo by Robert Galbraith.

Increasing US production has reined in oil prices

Despite data showing a strong draw in US crude stocks, oil prices dipped on Wednesday. Also impacting oil prices is data from the US Energy Information Administration showing a rise in US crude production and US oil exports.

US WTI was down by 40 cents by 12:51 p.m. EDT to $50.02/barrel and Brent dipped 21 cents to $55.79/barrel.  Western Canadian Select dropped 27 cents to $39.44/barrel.

According to the US Energy Information Administration, US crude stocks fell by 6 million barrels last week, a much larger decline than analysts’ expectations for an reduction in oil inventories of 756,000 barrels.

US crude output hit 9.56 million barrels per day (b/d) by the end of September, the highest since July 2015.

The EIA reports Gulf Coast refineries have been using more crude as they ramp up operations following Hurricane Harvey.

Reuters reports the $5 discount between Brent and US crude has helped make US WTI more attractive to buyers, boosting US oil exports.  But, rising US production has held back WTI prices.

Benchmark Brent’s value is influenced by OPEC policy decisions.

After an impressive third quarter rally for Brent prices, analysts are concerned that the crude is overvalued.  These concerns were boosted after Libya’s 230,000 b/d Sharara oilfield resumed production on Wednesday after armed brigades shut down the operation on Sunday.

“Fundamentals may not yet be strong enough to support a continued rally, especially in growth-dependent commodities such as oil,” Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank, told investors in a quarterly outlook.

Many observers see the market rebalancing due to high demand and OPEC’s supply cut agreement.

According to Reuters, OPEC Secretary-General Mohammad Barkindo said he believes the cartel can restore sustainability to markets.

Russian President Vladimir Putin said he has not ruled out extending the supply cut agreement to the end of 2018.