Oil Declines as Spare U.S. Supplies Menace OPEC's Anti-Glut Plan
Oil drops as focus shifts to the U.S. inventory after market tumult.
(Bloomberg) -- Oil in New York dipped on concern that expanding U.S. stockpiles knocked the steam out of OPEC’s cuts for another week.
Futures fell 0.7 percent in late trading on Wednesday. Storage in American tanks and terminals probably increased by 2.9 million barrels last week, according to a Bloomberg survey. If a government report on Thursday confirms that, it would be the fourth straight weekly gain, the longest expansion since the first quarter of 2017. An American Petroleum Institute report, said to show a 907,000-barrel decline, wasn’t enough to dispel the concerns.
OPEC has “taken a lot of production off the table, but it’s just being replaced by U.S. production to a large degree,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. Cartel members recently sought to reassure investors about their resolve but “the market’s not buying it.”
Oil has struggled to regain January’s highs as faltering confidence in the outlook for economic growth and a strengthening dollar reduce the appeal of commodities. The Organization of Petroleum Exporting Countries has reiterated not just its commitment to curbing an oversupply, but possibly even extending its alliance with Russia beyond this year.
West Texas Intermediate for April delivery fell 45 cents to settle at $61.34 on the New York Mercantile Exchange after the API report was released.
Brent for April settlement gained 17 cents to $65.42 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $4.08 premium to WTI.
The outlook for U.S. oil production in both 2018 and 2019 is “phenomenal,” Deputy Energy Secretary Dan Brouillette said in an interview Tuesday. The nation’s crude inventories have rebounded since late January and kept above 420 million barrels this month, according to Energy Information Administration data.
The Energy Information Administration is scheduled to release its weekly inventory report Thursday, a day later than usual due to the U.S. President’s Day holiday earlier this week.
Oil-market news:
- Production at the U.S. Permian oil field is set to rise for an 11th straight month to a record in February, according to a forecast from consultant Rystad Energy.
- Brent crude will average $64 a barrel in 2018 and $60 in 2019 as OPEC-led cuts unwind and U.S. supply responds to higher prices, Bank of America Merrill Lynch said in a report.
- The United Arab Emirates will deliver at least 100 percent of supply cuts this year, Energy Minister Suhail Al Mazrouei told reporters in London. OPEC compliance with the curbs is strong, while non-OPEC adherence is slipping.
- Nymex gasoline futures rose 0.4 percent to $1.7573 a gallon on Wednesday.
--With assistance from Heesu Lee and Rakteem Katakey
To contact the reporter on this story: Meenal Vamburkar in New York at mvamburkar@bloomberg.net.
To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll, Carlos Caminada
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