Oil prices down to lowest level since May 4
Oil prices dropped over 5 per cent on Wednesday after data from the US government showed an unexpected increase of crude and gasoline stocks.
The US Energy Information Administration (EIA) reported that crude inventories in the United States rose by 3.3 million barrels last week to 513 million barrels.
Analysts had expected a drop of 3.5 million barrels after data from the American Petroleum Institute released on Tuesday showed a large decrease.
As well, EIA data showed that gasoline inventories also rose, imports decreased and exports dropped.
US crude futures settled down by 5 per cent, or $2.47/barrel to $45.72/barrel. Crude dropped to its lowest level since May 4, as US benchmark futures were down over 11 per cent in 10 days of trading.
Brent crude prices dropped over 4 per cent to $48.06/barrel.
Gasoline futures were down by 4 per cent to $1.4921/barrel, the lowest since May 10. The EIA reports over gasoline demand is down 0.7 per cent in the past four weeks against this time last year.
“Flagging gasoline demand continues to bedevil the market. With gasoline currently the seasonal leader of the complex, its weakness is dragging everything down,” John Kilduff, partner at Again Capital in New York told Reuters.
Along with increasing US crude and gasoline inventories, some analysts are concerned about a move by Saudi Arabia and the United Arab Emirates to cut diplomatic ties with Qatar.
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As part of the OPEC supply cut pact, Qatar pledged to reduce its production by 30,000 barrels per day (b/d).
Analysts are worried that infighting amongst OPEC members and an increase in production from Nigeria and Libya could affect the efficacy of the OPEC deal.
Shell recently lifted a force majeure on exports of Forcados crude from Nigeria and the country’s oil exports are fully online for the first time in almost a year-and-a-half.
Some analysts see Qatar’s isolation-caused trade disruptions offering some short-term support for oil prices.
“Port restrictions on Qatari flagged vessels are going to cause loading disruptions,” Jeffrey Halley, analyst at brokerage OANDA told Reuters.
