Oil prices tank to November levels on unexpected rise in United States inventories

Oil tumbled to its lowest in four weeks as an unexpected increase in US crude and gasoline stockpiles stoked fears that the global supply glut will remain unabated.

According to the Energy Information Administration (EIA), crude inventories surprised traders with a 3.3 million barrel rise in the week-ended June 2.

Brent crude prices were at $48.32 USA per barrel mid-morning Wednesday, down $1.80, or 3.6%. USA light crude was down 18 cents at $47.22.

The bearish report represents the first crude inventory build in several weeks and lends credit to recent sentiment over USA shale production rising at a pace that could in part offset a production cut from the Organization of the Petroleum Exporting Countries. The 3.3M-barrel build in U.S. commercial oil inventories marked the first increase in 10 weeks and raised concerns over the effectiveness of the OPEC production cut agreement. United States crude oil (UCO) (FXN) (SCO) prices fell in post-settlement trade on June 6, 2017, despite the fall in inventories. However, the supply cut only had a marginal effect on reducing the supply and oil prices remained practically depressed.

Brent for August settlement was 14 cents lower at $49.98 a barrel on the London-based ICE Futures Europe exchange.

A campaign by leading Arab nations, including Saudi Arabia, Egypt and the United Arab Emirates, to isolate Qatar is disrupting trade in commodities, including oil.

The main reasons for the fuel price adjustments in June 2017 are the strengthening of the Rand against the US Dollar during the period under review and the average decrease in the prices of petroleum products in the global markets in line with the lower crude oil prices.

U.S. West Texas Intermediate (WTI) crude futures were at $48.13 per barrel, down 6 cents from the previous close, and 6 percent below its open on May 25.

Royal Dutch Shell Plc lifted restrictions on exports of a key Nigerian crude halted for more than a year, potentially undermining the efforts of other OPEC members to clear a glut. Analysts expect a 3.5 million barrel decline in inventories.

USA crude production will average more than 10 million barrels a day for the first time in 2018, breaking a record nearly five decades old and keeping prices from rising as much as previously estimated, government forecasts showed Tuesday.

The fall in inventories at Cushing also helped oil prices.

  • Zachary Reyes