Oil struggles for direction as U.S. output concerns persist
- Author: Zachary Reyes Apr 21, 2017,
Apr 21, 2017, 3:33
"A build to gasoline inventories is tilted a little bearish, although a build of 2.5 million barrels on the Gulf Coast was in response to higher refining activity", said Matt Smith, director of commodity research at ClipperData.
OPEC members Saudi Arabia and Kuwait signaled that an effort by the Organization of the Petroleum Exporting Countries and other producers, including Russian Federation, to cut oil output was likely to be extended beyond June. The May contract expires at settlement, and the more actively traded June contract recently gained 10 cents, or 0.2%, to $50.95 a barrel.
According to a U.S. Energy Information Administration report, U.S. crude supplies fell 1 million barrels in the most recent week, a smaller decline than expected.
At a press conference in the United Arab Emirates, Saudi Energy Minister Khalid al-Falih said that "there is consensus building but it's not done yet".
"We are still in a very well-supplied crude market in the U.S. The gasoline build was a bit of a surprise but makes sense given that this is the time of year refinery runs increase", Wellington, Florida-based Energy Analytics Group LLC director, Thomas Finlon, told Bloomberg by telephone.
James Williams, president of energy consultant WTRG Economics in London, Arkansas, said the minister's bullish statement did not lift prices much because of growing USA shale production. Despite a drop in US crude stocks last week, an unexpected 1.5-million-barrel build in gasoline stocks drove prices more than 3.5 percent lower on Wednesday. This is part of the production cuts that the oil-producing kingdom had agreed to as a member of OPEC. The report showed that Saudi Arabia's crude exports declined from 7.7 million barrels per day in January to 6.96 barrels per day in February.
Oil slid more than 1 percent on Wednesday, after US data showed a counter-seasonal build in gasoline inventories and a smaller-than-expected decline in overall crude stocks coupled with another rise in domestic crude production. Andrew Lipow, president of Lipow Oil Associates in Houston, said some in the market were concerned about the rapid recovery in shale production."Perhaps the amount coming out of the ground might be more than we anticipate", he said. Distillate stocks reached their lowest levels since November 2015, the EIA said.