Oil prices dropped close to 2 percent on Friday on a worsening global economic outlook after the European Central Bank (ECB) warned of continued weakness and fresh data showed Chinese imports and exports slumped last month. On the supply side, crude oil has been receiving support this year from output cuts led by the Organization of the Petroleum Exporting Countries (OPEC). But these efforts are being undermined by soaring U.S. crude oil production, which has increased by more than 2 million bpd since early 2018 to an unprecedented 12.1 million bpd. That makes America the world’s biggest producer, ahead of Russia and Saudi Arabia. Click read more below for additional detail.
Futures edged higher from the settlement in after-market trading in New York, prompted by reports that data from the American Petroleum Institute showed a 5.75 million barrel drop in gasoline last week and 4.95 million fewer barrels of distillate. Meanwhile, OPEC, set to meet next month on prolonging the cuts, are said to be planning how to prevent a new price-killing glut once they end.
The market “looks a lot more bullish than it did three or four months ago,” said James Williams, president of London, Arkansas-based energy researcher WTRG Economics. The stockpile declines aren’t surprising since “refinery utilization is coming down this time of year because it’s turnaround season,” he said. Nonetheless, he predicted prices will rally again Wednesday if the government confirms the drops.
The Organization of Petroleum Exporting Countries is expected to extend supply cuts beyond their March expiration date, which has supported oil above the key $50-a-barrel psychological threshold. In addition, oil demand is proving more resilient than some expected, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in Riyadh.
OPEC is implying it’s “likely to accept the current supply discipline for the rest of 2018, and ultimately the market is looking at that as optimistic,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto.
At the same time, one major contributor to weak crude prices — U.S. shale drillers — appear to be curtailing some activity. The most recent rig count by Baker Hughes showed the biggest one-week drop in the Permian Basin fleet in 19 months. Schlumberger Ltd. and Baker Hughes, the two largest oilfield-service companies, blamed their own lackluster profit reports on the reluctance of North American explorers to boost spending.
Stockpiles at Cushing, Oklahoma, the delivery point for New York-traded futures contracts, probably declined by 500,000 barrels, according to a separate forecast compiled by Bloomberg. A Bloomberg survey estimated that U.S crude stockpiles slid by 3 million barrels last week, while gasoline stockpiles probably rose by 1.7 million barrels.
The API report also showed crude stockpiles rose by 519,000 barrels, while Cushing supplies fell by 55,000 barrels last week. A draw at Cushing would be the first since August if the Energy Information Administration confirms it in its data release on Wednesday.
more at: https://www.bloomberg.com/news/articles/2017-10-23/oil-holds-gains-near-52-as-u-s-stockpiles-seen-extending-drop