Oil prices fell on Wednesday despite high compliance by OPEC pact participants. US production rose to 10.3 million barrels per day, putting pressure on oil prices. Apache photo.
Oil prices down over 1 per cent Wednesday
Oil prices fell over one per cent on Wednesday after data released from the US Energy Information Administration showed a higher-than-expected increase in crude inventories and gasoline stocks.
By 1:00 p.m. EST, Brent crude was down 85 cents to $65.67/barrel and US WTI fell 54 cents to $62.47/barrel. The Canadian Crude Index dropped 61 cents to $38.82.
According to the EIA, US crude stocks rose by 3 million barrels in the week ending Feb. 23. Analysts polled prior to the data release had expected a rise of 1.2 million barrels. Gasoline inventories posted a large gain of 2.5 million barrels, compared to analysts expectations of a drop of 190,000 barrels, and came at a time when refiners increased their activity.
As a result, gasoline futures declined by 2.2 per cent to $1.7636/gallon and lead the rest of the energy complex lower.
“The report was bearish, primarily due to the fairly large crude oil and gasoline inventory builds,” John Kilduff, partner at energy hedge fund Again Capital LLC told Reuters.
The increase in gasoline stocks coincided with increased activity by refiners, despite seasonal shutdowns for maintenance. Andrew Lipow, president of Lipow Oil Associates told Reuters “they continue to process more crude compared to previous years adding to gasoline and diesel supply”.
A Reuters survey showed participants in the OPEC supply cut agreement complied with their pledges and dropped overall production to 32.28 million barrels per day (b/d), the lowest since April of last year.
However, “climbing US production continues to weigh on the market as traders fear that the OPEC output cuts will be nullified by the rising US output,” William O‘Loughlin, investment analyst at Australia’s Rivkin Securities told Reuters.
Crude production in the United States is up by 20 per cent since mid-2016 and now sits at over 10 million b/d, according to the EIA. Last week, US production rose to 10.3 million b/d.
Oil prices were also pressured by a slowdown in monthly factory activity reported in China, India and Japan.
As well, the US dollar hit a one-month high on Wednesday. A stronger greenback makes oil more expensive for buyers using other currencies.