Oil Falls as U.S. Production Rises

Oil prices flipped from gains to losses Wednesday, with the U.S. benchmark trading lower after data showed that fuel inventories rose and U.S. production increased.

And Brent prices fell as concerns eased about the impact of the shutdown of a major pipeline system in the North Sea.

U.S. crude futures were down 36 cents, or 0.36%, to $56.78 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 74 cents, or 1.17%, to $62.60 a barrel on ICE Futures Europe.

The amount of crude in storage in the U.S. fell by 5.1 million barrels last week, according to data from the U.S. Energy Information Administration.

While that beat the 2.9 million-barrel drop predicted by analysts surveyed by The Wall Street Journal, the draw was smaller than the 7.4 million barrel decrease reported late Tuesday by the American Petroleum Institute, an industry group.

Gasoline stockpiles rose by 5.7 million barrels, exceeding expectations.

"There's a concern that drops in crude stocks are being put into fuel [storage] tanks. That doesn't make a real picture for strong demand," said Gene McGillian, research manager at Tradition Energy.

Also weighing on prices, U.S. crude output rose by 73 million barrels a day to 9.78 million barrels a day -- a fresh weekly record -- raising the prospect that shale producers will offset extended production cuts by the Organization of the Petroleum Exporting Countries and other major producers.

The U.S. Energy Information Administration on Tuesday raised its forecast for U.S. 2018 production to average 10 million barrels a day, compared with 9.2 million barrels a day in 2017 and exceeding the previous record of 9.6 million barrels a day set in 1970.

The prospect of rising U.S. output might be scaring bullish investors out of the market, said Tariq Zahir, managing member of Tyche Capital Advisors. Investors built up record net long positions in oil contracts in recent weeks in the run-up to the decision by OPEC and its partners to continue cutting output through the end of next year.

"With U.S. production going up again, stubbornly, is that going to affect OPEC members going forward?" Mr. Zahir said. "Some weak longs may be getting out."

Oil prices, particularly the Brent benchmark, jolted higher earlier this week after Ineos, a chemical company, announced that it was shutting down its Forties Pipeline System for a few weeks to repair a leak. That will stop the flow of some 450,000 barrels a day of North Sea oil output, forcing producers to shut in production.

But Brent prices have fallen after briefly surging above $65 a barrel Tuesday as investors took profits and concerns about the duration and impact of the outage eased.

Analysts at Société Générale said Wednesday that despite the disruption to the Forties system, there is still plenty of oil available.

"Our view is that further upside due to this event is limited; from current price levels, we believe the downside is bigger. The bottom line is that we would currently be a seller, not a buyer, of Brent," the analysts wrote.

Gasoline futures fell 3.4 cents, or 2%, to $1.6636 a gallon. Diesel futures fell 1.85 cents, or 0.96%, to $1.9151 a gallon.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

Oil prices flipped from gains to losses Wednesday, with the U.S. benchmark trading lower after data showed that fuel inventories rose and U.S. production increased.

And Brent prices fell as concerns eased about the impact of the shutdown of a major pipeline system in the North Sea.

U.S. crude futures were down 36 cents, or 0.36%, to $56.78 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 74 cents, or 1.17%, to $62.60 a barrel on ICE Futures Europe.

The amount of crude in storage in the U.S. fell by 5.1 million barrels last week, according to data from the U.S. Energy Information Administration.

While that beat the 2.9 million-barrel drop predicted by analysts surveyed by The Wall Street Journal, the draw was smaller than the 7.4 million barrel decrease reported late Tuesday by the American Petroleum Institute, an industry group.

Gasoline stockpiles rose by 5.7 million barrels, exceeding expectations.

"There's a concern that drops in crude stocks are being put into fuel [storage] tanks. That doesn't make a real picture for strong demand," said Gene McGillian, research manager at Tradition Energy.

Also weighing on prices, U.S. crude output rose by 73,000 barrels to 9.78 million barrels a day -- a fresh weekly record -- raising the prospect that shale producers will offset extended production cuts by the Organization of the Petroleum Exporting Countries and other major producers.

The U.S. Energy Information Administration on Tuesday raised its forecast for U.S. 2018 production to average 10 million barrels a day, compared with 9.2 million barrels a day in 2017 and exceeding the previous record of 9.6 million barrels a day set in 1970.

The prospect of rising U.S. output might be scaring bullish investors out of the market, said Tariq Zahir, managing member of Tyche Capital Advisors. Investors built up record net long positions in oil contracts in recent weeks in the run-up to the decision by OPEC and its partners to continue cutting output through the end of next year.

"With U.S. production going up again, stubbornly, is that going to affect OPEC members going forward?" Mr. Zahir said. "Some weak longs may be getting out."

Oil prices, particularly the Brent benchmark, jolted higher earlier this week after Ineos, a chemical company, announced that it was shutting down its Forties Pipeline System for a few weeks to repair a leak. That will stop the flow of some 450,000 barrels a day of North Sea oil output, forcing producers to shut in production.

But Brent prices have fallen after briefly surging above $65 a barrel Tuesday as investors took profits and concerns about the duration and impact of the outage eased.

Analysts at Société Générale said Wednesday that despite the disruption to the Forties system, there is still plenty of oil available.

"Our view is that further upside due to this event is limited; from current price levels, we believe the downside is bigger. The bottom line is that we would currently be a seller, not a buyer, of Brent," the analysts wrote.

Gasoline futures fell 3.4 cents, or 2%, to $1.6636 a gallon. Diesel futures fell 1.85 cents, or 0.96%, to $1.9151 a gallon.

Write to Sarah McFarlane at sarah.mcfarlane@wsj.com

Corrections & Amplifications

This item was corrected on December 14, 2017 at 0536 GMT to reflect that U.S. crude output rose by 73,000 barrels, not 73 million barrels, to 9.78 million barrels a day.

U.S. crude output rose by 73,000 barrels to 9.78 million barrels a day. "Oil Falls as U.S. Production Rises," at 12:15 p.m. and 3:28 p.m. Eastern time on Wednesday, incorrectly stated that output rose by 73 million barrels a day in the eight and seventh paragraphs, respectively. (12/14)

(END) Dow Jones Newswires

December 14, 2017 00:43 ET (05:43 GMT)