Oil Tumbles Most in Six Weeks as U.S. Gasoline Supplies Advance – 19 April, 2017
Oil dropped the most in six weeks after a report showed U.S. gasoline supplies increased for the first time since February, while crude output keeps rising.
Gasoline stockpiles climbed 1.54 million barrels last week, surprising analysts surveyed by Bloomberg who projected the Energy Information Administration data would show a 2-million-barrel decrease. Crude inventories fell 1.03 million barrels to 532.3 million, the agency reported Wednesday. Crude production rose to the highest since August 2015. Price drops accelerated as the dollar strengthened against its peers, curbing the appeal of commodities.
Oil had rallied above $53 a barrel after some members of the Organization of Petroleum Exporting Countries voiced support for prolonging cuts past June, but rising U.S. output is undermining the effort to trim a global glut. Production from major shale plays in May is forecast to climb to the highest level since 2015, according to the EIA.
“The glaring rise in U.S. gasoline refined product inventories, in combination with persistent lower-48 production growth, keeps us cautious on oil prices,” said Chris Kettenmann, chief energy strategist at Macro Risk Advisors LLC in New York. “We would not buy the intraday dip.”
West Texas Intermediate for May delivery dropped $1.97, or 3.8 percent, to settle at $50.44 a barrel on the New York Mercantile Exchange. It was the biggest decline since March 8 and the lowest close since April 3. Total volume traded was about 30 percent above the 100-day average. WTI settled below the 50-day and 100-day moving averages for the first time in two weeks.
Brent for June settlement fell $1.96, or 3.6 percent, to $52.93 a barrel on the London-based ICE Futures Europe exchange. It was the lowest close since March 31. The global benchmark crude ended the session at a $2.08 premium to June WTI.
Output Gain
Crude production advanced 17,000 barrels a day to 9.25 million in the week ended April 14, the highest since August 2015. Output in the lower-48 states rose 21,000 barrels a day to 8.72 million, also the highest since August 2015.
“There’s been a lot of attention paid to OPEC production cuts, while almost nobody has focused on the gains elsewhere,” Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by phone. “Production is up nine straight weeks here to the highest level since August 2015. The U.S. has increased production by about 600,000 barrels a day since the OPEC agreement, mitigating their cuts.”
U.S. supplies of crude are still near records and more than 100 million barrels higher than the five-year average for this time of the year, data compiled from the EIA show.
Refineries processed 16.9 million barrels a day, up 241,000 barrels from the prior week and the highest since the record 17.1 million was touched in January. American refiners typically boost operating rates at this time of year as they prepare for the summer surge in gasoline demand.
Expected Acceleration
“We should see an accelerating level of crude draws, something we’ve been waiting for a while,” Cavan Yie, senior equity analyst at Manulife Asset Management Ltd. in Toronto, said by phone. “The reasons are twofold. Refinery maintenance is finishing, which is leading to greater processing of crude, and the OPEC cuts are going to finally have an impact on U.S. inventories.”
The gain pushed gasoline stockpiles to 237.7 million barrels in the week ended April 14, leaving them 21 million barrels higher than average for the date over the last 10 years.
Gasoline futures for May delivery dropped 3 percent to $1.659 a gallon, the lowest close since March 28.
Oil-market news:
- Oil-exporting countries are moving closer toward ending a global glutand re-balancing the market, and OPEC will decide in May whether to extend production cuts, the group’s Secretary-General Mohammad Barkindo said.
- Iran will probably be allowed to keep its oil production unchanged if OPEC decides to extend its six-month agreement on output cuts beyond June, Kuwaiti Oil Minister Issam Almarzooq said.
Source: Bloomberg