Oil prices along with equities and other industrial commodities fell on concerns that setbacks in US-China trade talks could undermine already fragile world growth. Apache photo.
Oil prices down following EIA data report shows US crude, gasoline stocks up
Oil prices fell on Wednesday after the US Energy Information Administration reported US crude and gasoline stocks rose last week, despite growing demand. Analysts and investors also weighed the possibility that OPEC will increase production to head-off any possible supply shortfalls due to cuts in exports from Venezuela and Iran.
By 2:10 p.m., EDT, benchmark Brent was down 21 cents to $79.38/barrel. US WTI dipped 61 cents to $71.59/barrel and the Canadian Crude Index dropped 40 cents to $51.03.
According to the EIA, US crude stocks rose by 5.8 million barrels last week and gasoline inventories rose by 1.9 million barrels.
The builds were unexpected. Analysts participating in a poll prior to the data release expected a drawdown in both crude and gasoline stocks due to a seasonal rise in demand.
“A 5.8 million-barrel build is kind of like a slap in the face, where it’s like, ‘Where did this oil come from?’ And as you look through the numbers, it doesn’t make a lot of sense,”Phil Flynn, analyst at Price Futures Group told Reuters. “It is definitely a shock to the system.”
A combination of reduced US crude exports and rising imports caused the increase in stockpiles. Flynn says rising imports surprise him because Brent crude is now trading at over $7/barrel premium to US crude which should make exports more advantageous now.
Kyle Cooper, consultant at ION Energy in Houston told Reuters “while one week is not a change of trend, this was a bearish report”.
On Wednesday, investors dropped equities and other industrial commodities and bought the Japanese yen, US and German government bonds and gold on concerns that setbacks in US-China trade talks could kneecap increasingly fragile world growth.
OPEC could raise its production in June to allay fears that Iranian and Venezuelan crude exports will be cut. The cartel is also responding to concerns voiced by the Trump administration that the rally in oil prices was going to far, OPEC and oil industry sources told Reuters.
“It does seem like any move above $80 attracts selling interest right now and that could potentially lead us to a period of consolidation, where I think $77.50 or even $75 might be in focus,” Saxo Bank senior manager Ole Hansen told Reuters.
The International Energy Agency says oil prices have also been impacted by mounting geopolitical tensions that could cut global crude output at when demand is forecast to hit 100 million barrels per day by the final quarter of 2018.
As well, President Trump’s decision to walk away from the Iran sanction relief deal and plans to reimpose sanctions against Tehran which will cut exports as well as a significant decline in Venezuelan crude production due to an economic crisis have boosted oil prices.
On Wednesday, the EIA reported that heading into the Memorial Day weekend, regular gasoline prices are averaging $2.92/gallon, up from last year’s price of$2.40/gallon. Gasoline prices are now at the highest price ahead of the holiday weekend since 2014 when a gallon of gas cost $3.67/gallon.
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