Oil prices remained steady on Wednesday, despite data from the US Energy Information Administration showing an increase in US crude inventories by 2.2 million barrels.
Oil prices initially fell following release of EIA data
On Wednesday, oil prices dropped slightly after the US Energy Information Administration released data showing US crude stocks along with US crude production rose last week along.
By 1:05 p.m., EDT, US West Texas Intermediate was down 15 cents to $67.55/barrel and Brent crude dipped 44 cents to $72.63/barrel. The Canadian Crude Index slipped 5 cents to $50.01.
According to Reuters, a rise in US government borrowing costs to the highest level since 2013 this week, has moderated some investors’ risk appetite. However, analysts predict that in Brent crude futures could rise to above $75/barrel, marking new highs for the global benchmark in 2018.
So far this year, the OPEC supply cut agreement, steady growth in demand, Middle Eastern and Venezuelan unrest and a favourable structure in the futures market have attracted record investment in crude.
Earlier on Wednesday, crude prices dipped after the Energy Information Administration reported US gasoline and oil inventories rose last week by 2.2 million barrels. Analysts polled prior to the data release had forecast a decrease of 2 million barrels. As well, the EIA reported US crude production rose to 10.59 million barrels per day (b/d) last week.
Crude stocks at the Cushing, Oklahoma, delivery hub for oil imports rose by 459,000 barrels.
“The market is being led down by gasoline as inventories rose due to an extraordinary high level of imports and that is weighing on crude oil prices,” Andrew Lipow, president of Lipow Oil Associates told Reuters. “Tempering some of that weakness is the record exports of crude oil and distillate fuel last week.”
Money managers hold record positions in Brent crude futures and options. High premium of the front-month June contract over following months is making it profitable to invest in oil over the longer term.
“The prospect of a downside correction in prices is lost on the speculative fraternity. In fact, financial players have rarely felt more optimistic. Bets on rising crude prices are close to a near-record high,” PVM Oil Associates strategist Stephen Brennock told Reuters.