Oil prices fall for third session as US stockpiles surge
Futures slide despite Opec production cut as US oil output looks set to surge
“There’s a recognition that even with the Opec production cuts it’s going to take some time for this large inventory overhang to be reduced to more normal levels.” Photograph: iStock
Oil fell for a third day after industry data showed US crude stockpiles surged, raising speculation rising supply from US shale producers is offsetting cuts by Opec. Futures slid as much as 1.8 per cent in New York after falling 3.1 per cent the previous two sessions.
Crude supplies rose by 14.2 million barrels last week, the American Petroleum Institute was said to report Tuesday. Government figures on Wednesday are forecast to show stockpiles climbed for a fifth week. Oil output from the US will surge next year to the highest level since 1970, according to updated estimates from the Energy Information Administration (EIA).
Oil has fluctuated above $50 a barrel since a deal to trim output between the Organisation of Petroleum Exporting Countries (Opec) and 11 other countries took effect on January 1st.
While Opec members implement pledged cuts and Russia says its own reductions are ahead of schedule, US production has edged higher as drillers targeting crude boosted the rig count to the most since October 2015.
“There’s a recognition that even with the Opec production cuts it’s going to take some time for this large inventory overhang to be reduced to more normal levels,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “It leaves the oil price vulnerable to a move back below $50.”
West Texas Intermediate (WTI) for March delivery lost as much as 95 cent to $51.22 a barrel on the New York Mercantile Exchange and traded at $51.62 at 1.30pm in Hong Kong. Total volume traded was about 37 per cent above the 100-day average. The contract fell 84 cent to $52.17 on Tuesday.
Brent for April settlement dropped 61 cent, or 1.1 per cent, to $54.44 a barrel on the London-based ICE Futures Europe exchange. The contract fell 67 cent to $55.05 on Tuesday. The global benchmark crude traded at a premium of $2.40 to April WTI.
US crude inventories probably rose by 2.5 million barrels last week, according to the median estimate in a Bloomberg survey before an EIA report on Wednesday. American oil output will average 9.53 million barrels a day in 2018, up from 9.3 million projected in January, the EIA said in its monthly short-term energy outlook released Tuesday. Production averaged 8.94 million a day last month. – (Bloomberg)