Oil Hovers Near Seven-Month Low on Surplus Stocks

By Sarah McFarlane and Jenny W. Hsu Features Dow Jones Newswires

Crude futures stabilized on Thursday, after tumbling earlier in the week, with investor sentiment battered by data showing that the market remains awash in surplus oil.

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Brent crude, the global oil benchmark, edged up 0.1% to $47.04 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.1% at $44.71 a barrel.

Oil markets tanked by nearly 4% on Wednesday, with WTI hitting its lowest level since November, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated.

"The market right now is fixated on whether or not oil inventories are coming down," said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas, adding that the EIA's weekly data is the only timely indicator for this.

Compounding the woes was the unexpected increase in gasoline stocks, surprising many traders and analysts who expected much of the excess gasoline to be mopped up during the U.S. summer driving season. Data show gasoline demand has fallen for three weeks straight.

"We're not yet at the peak of driving season as we're only in June so we'll have to see how the gasoline inventory situation evolves in July and August," said Mr. Tchilinguirian.

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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 ongoing 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.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--fell 0.4% to $1.43 a gallon. ICE gasoil changed hands at $420.50 a metric ton, up $1.75 from the previous settlement.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

Oil prices inched lower Thursday with an unexpected increase in gasoline stockpiles weighing on the market for a second-straight session.

Light, sweet crude for July delivery recently lost 20 cents, or 0.5%, to $44.53 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, lost 11 cents, or 0.2%, to $46.89 a barrel on ICE Futures Europe. Both are trading at points that would set fresh lows dating back to November if they stick until settlement.

Oil markets tanked by nearly 4% on Wednesday following U.S. Energy Information Administration data showing 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.

Gasoline prices also fell to intraday lows dating back to November on Thursday, though they have since rebounded. Gasoline futures recently gained 0.1% to $1.4346 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.

Many traders and analysts expected much of the excess gasoline to be mopped up during the U.S. summer driving season. Data show gasoline demand has fallen for three weeks straight.

"We're not yet at the peak of driving season as we're only in June so we'll have to see how the gasoline inventory situation evolves in July and August," said Harry Tchilinguirian, head of commodity market strategy at BNP Paribas.

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 were up 0.1% at $1.411 a gallon.

Write to Timothy Puko at tim.puko@wsj.com, Sarah McFarlane at sarah.mcfarlane@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

June 15, 2017 11:26 ET (15:26 GMT)