Oil dips as US crude stockpiles swell
SINGAPORE: Oil prices slipped on Thursday after US crude inventories swelled to their highest level since December 2017 amid concerns of an emerging global glut, although the potential for a supply cut by OPEC prevented further drops.
US West Texas Intermediate (WTI) crude futures, were at $54.47 per barrel at 0740 GMT, 16 cents, or 0.3 per cent below their last settlement.
Front-month Brent crude oil futures were at $63.34 per barrel, down 14 cents, or 0.2 per cent.
US commercial crude oil inventories rose by 4.9 million barrels to 446.91 million barrels last week, the Energy Information Administration (EIA) said in a weekly report on Wednesday. That was the highest level since December last year.
US crude oil production remained at a record 11.7 million barrels per day (bpd), the EIA said.
“US inventory data... continued to show significant supply builds, which comes on the back of sustained record US crude oil production,” said Stephen Innes, head of trading for Asia-pacific at futures brokerage Oanda in Singapore.
Weak Asian markets as investors fret about slowing global growth in the face of rising US interest rates and trade tensions, also weighed on crude markets, traders said.
Despite this, some analysts have warned that oil markets have little spare capacity able to handle unforeseen supply disruptions.
However, Innes said that once US pipeline bottlenecks were alleviated, which he said he expected in 2019, “the entire notion of a tight global spare capacity argument goes down the well.” A lot of US and also Canadian oil is struggling to get to market because production increases have outpaced pipeline expansions to handle shipping the additional crude.
As a result, Canada’s federal government is considering a proposal from its main oil producing province of Alberta to share the cost of buying rail cars to move oil stuck in the region to refineries in the United States.
Meanwhile, the Middle Eastdominated Organization of the Petroleum Exporting Countries (OPEC) is worried about the emergence of a supply glut that could further pull down prices.