Oil prices claw back some ground after plunging to year lows
Oil prices attempted a slight rebound Thursday on the heels of plunging to their lowest levels in a year after weekly data which showed a higher-than-expected build-up in U.S. inventories.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in April CLJ7, +0.52% traded at $50.60, up 32 cents, or 0.6% in the Globex electronic session. May Brent crude LCOK7, +0.73% on London’s ICE Futures exchange rose 44 cents, or 0.8%, to $53.55 a barrel.
The U.S. Energy Information Administration on Wednesday reported an 8.2 million barrel increase in domestic crude supplies for last week, lifting total commercial inventories to a record weekly level of 528.4 million barrels. The weekly climb was the ninth in a row.
U.S. oil inventories are now at the highest level since weekly stockpile data started being recorded in 1982. WTI crude sank 5.4% lower on Wednesday, while Brent tumbled 5%, both finishing at their lowest levels this year.
Data on Tuesday from the American Petroleum Institute had showed that domestic crude inventories rose by a whopping 11.6 million barrels in the week ended March 3. Analysts polled by S&P Global Platts had forecast an inventory increase of 1.6 million barrels.
“There was a huge build up in speculative position that sold off after seeing the rise in U.S. inventories,” said Gnanasekar Thiagarajan, director of Commtrendz Risk Management. “I expect OPEC members to talk up prices from these levels.”
Organisation of the Petroleum Exporting Countries (OPEC) Secretary-General Mohammed Barkindo said Tuesday, at a conference in Houston that commitment among countries who have planned output cuts, “remains high.” Energy ministers from several major oil producing countries including Iraq and Saudi Arabia also reiterated their commitment to reduce production.
There is increasing talk of extending the OPEC production cut agreement, said ANZ Bank, adding that Iraq and Oman have already voiced their support for an extension.
But latest data from the U.S., which is not part of the output cut pact showed that crude production last week reached a more than one-year high.
China’s latest trade data showed a marginal decline in imports by the world’s second-largest energy consumer after a strong consumption trend over the past few months. However, China’s consumption is expected to pick up soon as additional refining capacity comes on board.
Despite rising U.S. output most analysts are optimistic that oil prices will rise in the near term as cutbacks by OPEC members and other nations like Russia start to tighten supplies.
“It is increasingly looking like OPEC will need to extend supply cuts beyond mid‑year in order to meaningfully reduce the surplus in oil markets and keep prices elevated,” a Commonwealth Bank of Australia report said.
U.S. oil producers have lifted output on the back of stronger oil prices following the decision by OPEC and other producers to sideline 1.8% of global supply in the first half of 2017, the report added.
Meanwhile, oil product futures were mixed.
Nymex reformulated gasoline blendstock for April RBJ7, +0.33% — the benchmark gasoline contract — rose 49 points to $1.6575 a gallon.
ICE gasoil for March changed hands at $471.5 a metric ton, down $11.25 from Wednesday’s settlement.
Source: MarketWatch
