The Economy

Oil Prices Fall as Crude Stocks Hit New Record

The price of the benchmark crude dropped to the lowest level since OPEC countries agreed to cut output by 1.8 million bpd in the first half of 2017.
Matthew HellerMarch 23, 2017
Oil Prices Fall as Crude Stocks Hit New Record

Oil prices slid to four-month lows on a U.S. government report that showed U.S. crude oil inventories rose to a new record last week.

According to the Energy Information Administration, crude stocks hit 533.1 million barrels after surging 5 million barrels in the week to March 17, nearly double analysts’ expectations for a 2.8 million-barrel gain, as imports soared 1.1 million barrels per day.

“A strong rebound in imports has more than offset a solid increase in refinery runs,” said Matt Smith, director of commodity research at ClipperData.

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U.S. production rose to 9.1 million bpd for the week ended March 10 from an average 8.9 million bpd for 2016 as shale producers added rigs.

Refinery crude runs rose 329,000 bpd last week as utilization rates jumped 2.3 percentage points to 87.4% of capacity. “This is evidence that refinery maintenance is wrapping up for this season,” said David Thompson, executive vice-president at Powerhouse, an energy commodities broker in Washington.

As Reuters reports, “Crude stocks in the world’s top oil consumer have been building since the beginning of the year and undermining hopes that an OPEC-led deal to cut production will reduce a persistent global glut.”

On news of the EIA report, global benchmark Brent crude futures for May delivery traded down 31 cents on Wednesday at $50.65 a barrel after falling as low as $49.71 — the lowest level since Nov. 30 when OPEC countries agreed to cut output by 1.8 million bpd in the first half of 2017.

“The market remains nervous about rising U.S. production, which is also reducing the effectiveness of output cuts by the OPEC and some non-OPEC countries,” said Abhishek Kumar, senior energy analyst at Interfax Energy in London.

U.S. bank Jefferies said U.S. crude production was expected to grow by 360,000 bpd in 2017 and 1 million bpd in 2018, and a price recovery could spur more U.S. shale activity.

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