Oil rally fading amid massive US supply
INVENTORIES AT CUSHING, OKLAHOMA HIT RECORD 61.5M BARRELS
Oil’s surge to the highest level of the year may be shortlived as the biggest US stockpiles in 85 years cushion against a drop in production.
West Texas Intermediate crude jumped about 7 per cent this week after the Energy Information Administration predicted that the shale boom that’s swelled US output to a record is ending. The nation’s inventories increased for a 14th week to the highest level since 1930, EIA data showed Wednesday.
Prices rebounded 17 per cent this month as a record decline in rigs seeking oil boosted speculation that production will soon slow and as refineries used more crude after seasonal maintenance. Opec increased output by the most in four years even as US shale output is poised to fall. These mixed signs are likely to whipsaw prices amid increased volatility, according to oil historian and economist Daniel Yergin.
“I have a really hard time thinking that we’ve reached a turning point,” said Bill The much debated shape of the oil-price curve will take the form of a W and increased supply will renew downward pressure on prices as volatility is exacerbated by storage and investment decisions, oil historian and economist Daniel Yergin said on Tuesday. Output from the Organisation of Petroleum Exporting Countries rose saw the biggest gain since June 2011, the International Energy Agency said Wednesday. O’Grady, chief market strategist at Confluence Investment Management in St Louis, which oversees $3.4 billion (Dh12.5 billion). “You still have 480 plus million barrels of oil. I don’t think you’ll get a decline in stockpiles soon.”
WTI for May delivery fell 93 cents, or 1.6 per cent, to $55.46 a barrel in electronic trading on the New York Mercantile Exchange at 7.02am local time. It increased $3.10 to $56.39 a barrel Wednesday, the highest settlement since December 23.
US crude supplies climbed 1.29 million barrels to 483.7 million last week. Monthly data going back to 1920 show stockpiles haven’t been this high since 1930.
Drop in output
Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the EIA said on Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.
Inventories at Cushing, Oklahoma, the delivery point for WTI traded in New York, climbed 1.29 million barrels to a record 61.5 million. The hub has a working capacity of 70.8 million, according to the EIA.
WTI could see a “potentially large pullback that could take prices back to the low $40 range as Cushing storage nears its maximum working capacity,” Vikas Dwivedi, an analyst in Houston at Macquarie Capital Inc., said in a report Tuesday.