Oil prices drop as supply declines

03 November, 2018, 05:12 | Author: Sally Reid
  • Crude Oil

A report released by the American Petroleum Institute on Tuesday showed US crude supplies rose by 5.7 million barrels last week, more than analyst forecasts for a 4.1 million-barrel build. More so, the ongoing increase in the United States stockpiles also added to the rising supply concerns. Some wondered whether the EIA was not reporting the data or that it never changed from week to week.

"We're pleased with the increase in production from the second quarter of 2018 recognizing it reflects contributions from just one of our key growth areas, the Permian", CEO Darren Woods said. With more pipelines coming on-line, more shale can get out, so producers could be taking advantage of that.

However, OPEC's reserves are more than likely overstated.

According to Vanda Insights, supply concerns continued to ease this week, with reports of a fifth consecutive monthly increase in OPEC production, and independent surveys showing that OPEC's 15 members touched a two-year high output of 33.3 million barrels per day in October. The smallest deficit actually came from earlier this month (10/5).

At the same time, gasoline held in storage fell by 3.2 million barrels and distillate fuel inventories - including diesel and heating fuel - dropped by 4.1 million barrels.

Iran sells oil on exchange in bid to counter sanctions: AFP report
Front-month Brent crude oil futures LCOc1 were trading down 46 cents, or 0.6%, at $77.16 a barrel at 0745 GMT. Oil capped its worst month in more than two years as concerns mount that the global economy will slow down.

Investors awaited industry data on US crude inventories, due to be released at 4:30 p.m. EDT on Tuesday.

Oil prices moved up for the first time in three days yesterday, but rising supply and fears over the outlook for demand amid the U.S. Now there is talk that other counties like China might ask for a pass as well. But on Monday, trying to dismiss such concerns, Saudi Arabia's Energy Minister Khalid Al-Falih said that "there is no intention" for such action, and that Saudi Arabia would play a "constructive and responsible role" in world energy markets. EIA forecast that USA crude oil production to increase by 1 million barrels per day in 2019. Analysts had predicted a draw of 2.137 million barrels for the week. That is not very comforting when you consider that total commercial petroleum inventories decreased last week by 6.4 million barrels. While far from the highs of the past five years, this is only slightly above the five-year average for inventory levels. WTI is now more than $11 below its October 3 high of $76.90.

But there appears to be no significant shortage of crude.

Beyond Iran sanctions, oil output has been rising significantly in the past two months. Sanctions on the country would lead to retaliation by Saudi Arabia which may then lead to higher oil prices.


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