Oil prices fell on Thursday as record U.S. crude inventories underscored that markets remain bloated by high production and brimming storage despite efforts led by OPEC to cut output and prop up prices.
Oil prices fell on Thursday as record U.S. crude inventories underscored that markets remain bloated by high production and brimming storage despite efforts led by OPEC to cut output and prop up prices. Brent crude futures, the international benchmark for oil, were at $54.09 per barrel at 0124 GMT, down 27 cents, or 0.5 percent, from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 29 cents, or 0.6 percent, at $50.86 a barrel. Traders said the price falls came on the back of rising U.S. crude oil production that resulted in record inventories.
U.S. fuel inventories and oil production levels are key to determine whether the United States will remain the world’s biggest oil importer, which is a price supporting indicator, or if its soaring production and bloated stocks lead to lower imports and trigger shipments to the rest of the world, which would weigh on oil markets. The U.S. Energy Information Administration (EIA) reported a 1.57 million barrels increase in crude inventories late on Wednesday, bringing total U.S. stocks to a new record of 535.5 million barrels <C-STK-T-EIA>.
“Weaker-than-expected U.S. oil inventory data saw the sector sell off,” ANZ bank said on Thursday. The bloated crude inventories came as U.S. oil production rose 52,000 barrels per day (bpd) to 9.2 million bpd <C-OUT-T-EIA>, a more than 9 percent increase since mid-2016 to levels last seen at the start of the oil market slump in late 2014 and early 2015. Within the U.S. crude inventories, stocks at Cushing, in Oklahoma, are seen as particularly important as this is the delivery hub into the U.S. WTI pricing hub.
Crude stocks at Cushing rose 1.4 million barrels to a record 69.1 million barrels. Cushing crude tank farms have a total storage capacity of 77 million barrels, said Ole Hansen, head of commodity strategy at Saxo Bank. U.S. Gulf Coast inventories also jumped, by 2.7 million barrels, to a peak of 280.9 million barrels, the EIA said. Because of the glut, U.S. crude exports have soared to a record 1.1 million bpd, with most cargoes going to Asia, eroding efforts led by the Organization of the
Petroleum Exporting Countries (OPEC) to cut output in an effort to prop up prices. Somewhat offsetting the bloated U.S. crude market, however, is strong demand. ANZ said that high refinery activity “negated some of that (crude) weakness,” with refineries operating at 90.8 percent at capacity last week, up 1.5 percent from the previous week.