Oil Falls For The Third Day

08 February, 2018, 12:34 | Author: Terri Saunders
  • EIA: China became world's largest crude oil importer in 2017

U.S. crude inventories rose 1.9 million barrels last week, compared with analysts' expectations for an increase of 3.2 million barrels, the U.S. Energy Information Administration's (EIA) data showed on Wednesday. The EIA forecasts that U.S. shale oil production will grow by 111,000 barrels a day to 6.55 million bpd in February, a new record.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures retreated for a fourth straight session on Wednesday, building on selling momentum that began late last week.

Meanwhile, commodity pricing group S&P Global Platts said it expects data to show crude oil stocks in the United States increased 2.8 million barrels and gasoline rose 200,000 barrels.

At 10.25 million bpd, US output is now higher than the previous 10.044 million bpd record from back in 1970.

Gasoline stockpiles continued to increase last week, the EIA also said. It also expected the WTI crude oil prices to average 4 dollars lower than Brent prices in both 2018 and 2019. That compares with a forecast of nationwide inventories rising by 3.15 million barrels in a Bloomberg survey.

Crude imports fell by 538,000 bpd to 7.89 million bpd for the week ending 2 February, and commercial crude stocks slightly rose 1.9 million bpd to 420.3 million, the EIA data said. The five-year average for the same period is a build of 4 million barrels.

The turnaround in the past decade, the EIA reported, has been led "mainly by production from tight rock formations including shale and other fine-grained rock using horizontal drilling and hydraulic fracturing to improve efficiency". But even as stock markets have started to recover, USA crude futures are falling toward their lowest levels since the beginning of the year.

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OPEC and non-OPEC producers reached anagreement in December 2016 to curtail oil output jointly and ease a global glut after more than two years of low prices. While equity markets are clawing back on calls to 'buy the dip, ' crude's advance is being driven by industry data that showed an unexpected decrease in USA stockpiles.

Chinese crude oil imports will continue to grow over the next few years as the use of oil products grow along with the economic and refinery capacity expansion, analysts say.

Until the early 2000s, the United States was oil starved, importing a peak of 12 million bpd.

A stronger dollar and demand concerns also weighed on oil prices.

Although Wall Street stocks recorded their biggest intraday drop since 2011 on Monday and measures of volatility hit multi-year highs, oil has not been as disturbed as one would think.

"It takes a number of days for the market to find equilibrium and find a clear bottom", said Quincy Krosby, chief market strategist at Prudential Financial in Newark, NJ.

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