Oil prices down despite significant decline in US crude stocks
Oil prices fell on Wednesday despite data from the US Energy Information Administration showing a significant decline in US crude stocks.
Prices dipped due to a larger-than-expected increase in US gasoline inventories and ballooning crude output from US producers.
By 2:57 p.m. EST, US WTI had fallen 47 cents to $56.67/barrel and Brent crude was down 89 cents to $62.45/barrel. The Canadian Crude Index sat at $32.76.
According to the EIA, US crude stocks fell by 5.1 million barrels last week, much more than expected. But, production rose to a record high of 9.78 million barrels per day (b/d).
Reuters reports that at 10.04 million b/d, the US peak in oil production was set in November 1970, at a time when records were only kept on a monthly basis.
On Tuesday, the EIA forecast that domestic crude output will increase by 780,000 b/d to a new record high of 10.02 million b/d by next year.
Gasoline stocks rose by 5.7 million barrels, more than double analysts’ expectations.
“It’s kind of a mixed bag across the board – a little bigger than expected draw on crude but gasoline demand was down slightly. Usually in this time of year you see a little bit more demand,” Tariq Zahir, managing member at Tyche Capital Advisors told Reuters.
On Tuesday, Brent ended the day down 2.1 per cent on profit taking after the unplanned shutdown of the Forties North Sea pipeline earlier in the week. The closure of the largest pipeline in the North Sea helped boost Brent over the $65 mark for the first time since mid-2015.
The Forties pipeline is the largest of the five crude oil streams that underpin the Brent benchmark. Repairs on the shuttered line may take several weeks, according to the 450,000 b/d pipeline’s operator.
As a result of the pipeline shutdown, BP, Shell and other producers have closed down affected oil fields.
Gains seen as a result of the shutdown and resulting cut in output were erased by rising US output and a stagnant global oil glut.
“The fact that the market sold off so much after the Forties outage shows that the market struggles to trend higher. Now, we’re basically where we were a month ago,” Olivier Jakob of Petromatrix consultancy told Reuters.
