Oil slides to two-week low on US gaso­line build

Business World - - WORLD MARKETS -

NEW YORK — Oil fell to a twoweek low on Wed­nes­day, af­ter a sur­pris­ing build in US gaso­line in­ven­to­ries and a rise in do­mes­tic crude out­put that is par­tially off­set­ting cut­backs by other coun­tries try­ing to re­duce a global glut.

US crude fu­tures set­tled down $1.97 to $50.44 a bar­rel, a 3.80% drop, the big­gest one-day de­cline since March 8. Brent crude set­tled down 3.60%, or $1.96 a bar­rel, to $52.93.

US crude stocks fell one mil­lion bar­rels in the lat­est week, the US En­ergy In­for­ma­tion Ad­min­is­tra­tion ( EIA) said, a smaller draw than ex­pected. Gaso­line stocks posted a counter-sea­sonal build of 1.5 mil­lion bar­rels, de­spite heav­ier re­fin­ing ac­tiv­ity.

The sur­prise gaso­line build, along with an in­crease in US pro­duc­tion and im­ports from OPEC na­tions, pres­sured prices. Weekly im­ports from OPEC na­tions rose by 900,000 bar­rels, the EIA said.

“In­ven­to­ries re­main stub­bornly high,” said Gene McGil- lian, man­ager of mar­ket re­search at Tra­di­tion En­ergy in Stam­ford, Con­necti­cut.

Mr. McGil­lian added that as the United States is ap­proach­ing the sum­mer driv­ing sea­son, “the build in gaso­line points to the fact de­mand isn’t as strong as we ex­pected.”

The global crude glut has per­sisted even as the OPEC and other pro­duc­ing coun­tries have worked to re­duce out­put al­most 1.8 mil­lion bar­rels per day this se­mes­ter.

“Ris­ing US pro­duc­tion lev­els are off­set­ting more than a third of the six- month agree­ment of the 1.8 mil­lion bar­rel- per- day cut,” Mr. McGil­lian said. “It’s the warn­ing bell to the strength of the mar­ket.”

“They drop pro­duc­tion, we add pro­duc­tion, and so at end of the day it’s ugly,” said Robert Yawger, en­ergy fu­tures strate­gist at Mizuho Amer­i­cas.

US pro­duc­tion rose to 9.252 mil­lion bar­rels a day in the lat­est week, high­est since Au­gust 2015.

Andrew Lipow, pres­i­dent of Lipow Oil As­so­ciates, said some in the mar­ket were con­cerned about the rapid re­cov­ery in shale pro­duc­tion. “Per­haps the amount com­ing out of the ground might be more than we an­tic­i­pate.”

Ex­pec­ta­tions for tighter sup­ply boosted front-month fu­tures con­tracts ear­lier this year against later- dated con­tracts. That trend has re­versed. On Wed­nes­day, front- month Brent was 53 cents cheaper than next month’s Wed­nes­day; it was 29 cents at the begin­ning of the month. This sug­gests traders are less con­fi­dent the glut is be­ing cut. —

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