Crude Oil Prices Slump After Shock Inventory Build

Global oil prices turned lower on Thursday, failing to hold on to slight gains on the heels of the sharpest daily fall since early March on an unexpected build up in USA crude inventories last week.

US West Texas Intermediate (WTI) crude futures were at $47.98 per barrel, down 21 cents, or 0.4 per cent, from their previous close, and down over 6 per cent from May 25.

The announcement comes after the Organization of the Petroleum Exporting Countries have come up with an agreement to extend oil production cuts by nine months to further help push oil prices up and avoid global oversupply.

According to the Financial Times, the sharp fall in oil prices was due to the Energy Information Administration (EIA) reporting U.S. inventories had increased 3.3 million barrels to 513.2 million barrels, countering estimates of a decline of similar size in its weekly report.

Crude oil imports meanwhile rose by 356,000 barrels per day versus the prior week, the EIA said, with refineries running at 94.1% of their operating capacity.

Oil futures were down Wednesday over concerns over rising USA production ahead of weekly stockpile and output data from the Energy Department.

In the United States, crude inventories fell by 8.7 million barrels in the week to May 26, data from the American Petroleum Institute showed late on Tuesday.

U.S. Gasoline stocks also rose by 3.3 million barrels. Traders are concerned the glut in the oil market is growing again.

Earlier that same month, Saudi Aramco said it would cut crude supplies to China, South Korea, and South East Asia by 1 million barrels each.

Analysts say the cuts have created a floor for oil prices, which has benefited US shale producers, who are aggressively expanding their operations and raising their oil exports.

Brent crude futures, the global benchmark, were trading down 0.84 per cent at $49.70 a barrel at the time of publishing.

Oil has traded below $50 a barrel amid speculation that rising U.S. supply will counter an extension of production curbs by Opec and its partners, including non-Opec member Russian Federation. He pointed to high levels of crude production in the United States, the North Sea and the potential for rising output from Libya and Nigeria.

"To add to this, OPEC could face a brewing political crisis as two key members have broken diplomatic ties with Qatar". "The market's seeing the real risk as being a lack of compliance or a lost deal right now as opposed to supplies being disrupted by hostilities".

USA light crude was down 15 cents at $47.25.

  • Zachary Reyes