Oil prices slipped again Thursday, guided lower for a second-straight session by an unexpected increase in gasoline stockpiles.
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Light, sweet crude for July settled down 27 cents, or 0.6%, at $44.46 a barrel on the New York Mercantile Exchange. It is the lowest settlement since Nov. 14.
The losses extended a selloff that started Wednesday when crude tanked by nearly 4% after the U.S. Energy Information Administration reported gasoline inventories rose by 2.1 million barrels last week, a time when analysts thought those inventories had declined. It raised questions about whether demand would grow enough at the height of summer driving season to burn up a longstanding glut of crude, questions still leading the market Thursday, analysts and a broker said.
It was the latest in a series of big losses that have become commonplace in oil this year. Many expected output cuts enacted by the world's biggest exporters to reduce oversupply this year. But stockpiles in the U.S. kept growing anyway and are still holding near historic highs after several recent weekly declines. That has confused traders and forced several big selloffs since March.
"The past week has shown that the oil market remains in a fragile state in which minor changes can tip the scales," analysts at RBC Capital Markets said in a note Thursday afternoon.
With stockpiles still holding near highs, demand becomes especially important. Many traders and analysts expected much of the excess gasoline to be mopped up during the U.S. summer driving season. But data show gasoline demand has fallen for three weeks straight.
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Gasoline prices fell to intraday lows dating to November in early trading, though they rebounded later. Gasoline futures settled up 0.3 cent, or 0.2%, to $1.4357 a gallon.
"The gasoline is a market in dire need of a major reduction in U.S. refinery activity and such a development is not currently showing up on the radar," said Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates.
Market sentiment was already weak before the EIA readings, after both the global oil cartel and the top energy watchdog, the International Energy Agency, noted that the global supply growth rate continues to outpace demand and will do so until next year at least. That was despite the continuing output cuts by the Organization of the Petroleum Exporting Countries and other producers including Russia. The cuts are aimed at bringing global OECD inventories down to their five-year average.
"Any build in U.S. commercial stocks gives us an indication of the uphill battle OPEC is facing in achieving its target," said Tamas Varga at brokerage PVM.
The IEA predicts non-OPEC production, mainly U.S. supplies, will grow by 1.5 million barrels a day in 2018, while global daily demand will only see a rise of 1.4 million barrels.
"To me, that's the biggest alarm bell. There are no signs of shale producers holding back their production even though prices have been dropping," said Phin Ziebell, an economist at National Australia Bank.
Diesel futures gained 0.44 cent, or 0.3%, to $1.4146 a gallon.
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(END) Dow Jones Newswires
June 15, 2017 15:42 ET (19:42 GMT)