Oil dips on glut concerns, but Mideast tension, falling U.S. stocks support
- Author: Zachary Reyes Jun 21, 2017,
Jun 21, 2017, 17:39
Oil prices dipped on Wednesday, with Brent crude futures failing to find support at $50 per barrel, as global fuel markets remained oversupplied, although rising tension in West Asia and falling USA inventories lent some support.
USA stockpiles grew by 3.3 million barrels in the week ending June 2, while the market had expected a 3.5 million barrels decline, the Energy Information Administration said. Forecasters had predicted a decline in inventories. West Texas Intermediate light sweet crude futures were trading at just above $46 a barrel.
August Brent crude also fell down 1% or 48 cents closing in at $49.47 per barrel which was the benchmark's lowest settlement in the past month. Output in the American oil patch has surged about 9 percent to 9.3 million barrels over the last eight months.
Crude inventories rose by 3.3 million barrels (bbl) in the week ended June 2, compared with expectations for a decrease of 3.5 million bbl, the first such increase in 10 weeks.
Oil traded little changed as diplomatic efforts to resolve a clash between Qatar and Saudi Arabia played out, with crude supplies seen as unaffected.Futures slipped as much as 1% in NY. WTI is now trading at $48.1 per barrel and Brent at $2.3 per barrel premium to WTI.
Greg McKenna, chief market strategist at futures brokerage AxiTrader, said he believed there was "a real chance" Opec solidarity surrounding production cuts might fracture.
The deteriorating relations pose risk against the successful implementation of OPEC deal that was extended last month to limit member countries' oil production levels through next March, according to experts.
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.
Investors are also not happy with the fact that OPEC is still exempting Nigeria and Libya from the production cuts.
The concern is that that spat will lead the OPEC members to disregard their production-cutting agreement.
"If we get another drop in United States inventory levels, we might begin to see the emergence of some confidence that 1.8-million barrel cuts will tighten inventories", McGillian said.