Oil prices fell on Tuesday, mostly on concerns of rising US crude inventories. On Tuesday afternoon, the American Petroleum Institute will release data on US oil stocks and on Wednesday morning, the US Energy Information Administration will release its data on crude inventories. Anadarko photo.
US oil prices drop by over $1/barrel
Oil prices fell on Tuesday as investors await data on United States crude stocks from the American Petroleum Institute and the US Energy Information Administration.
Analysts participating in a poll by Reuters anticipate crude inventories in the US to have increased by 2.7 million barrels last week. They also forecast that stockpiles of each gasoline and distillates will fall by 200,000 barrels.
By 4:15 p.m. EST, Brent was down by 84 cents to $66.45/barrel and US WTI fell by $1.02 to $62.89/barrel. The Canadian Crude Index bucked the trend and rose by 2 cents to $39.31.
Soaring US production is kneecapping OPEC’s efforts to rebalance the oil market. A number of OPEC nations along with Russia and other non-cartel oil producing countries have agreed to collectively cut their production by 1.8 million barrels per day (b/d).
While compliance with the agreement is high, US production has jumped to 10.27 million b/d and the International Energy Agency predicts the US could overtake Russia as the world’s largest producer of oil by the end of the year.
“U.S. shale growth is very strong, the pace is very strong … The United States will become the No.1 oil producer sometime very soon,” he told Reuters.
Tyler Richy, co-editor of the Stevens Report told Market Watch that US production is averaging a gain of 70,000 b/d each week, more than 3.5 times the pace of production growth in 2017.
Richy adds the US EIA weekly report “will indeed be very important”.
“This week, it will be important for the health of the oil rally that U.S. production figures come in closer to (or below) the 2017 average (up 19,000 barrels a day) as another big increase would be a renewed headwind on the energy complex,” said Richey.
Reuters reports that Olivier Jakob, analyst with Petromatrix, wrote in a note “it is likely that the … monthly data will show U.S. crude oil production in December about 200,000-300,000 bpd above what was estimated in the weekly reports”.
A stronger US dollar also pressured oil prices.
Also on Tuesday, Reuters reported that representatives from OPEC, including the cartel’s secretary general will meet with US shale producers to discuss the global oil glut.