Oil Falls on Rising U.S. Gasoline Supplies

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Oil prices edged down Wednesday morning, partly in response to rising U.S. product inventories.

Brent crude, the global benchmark, was down 0.62% at $62.47 a barrel on London's Intercontinental Exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.71% at $57.21 a barrel.

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Late Tuesday, the American Petroleum Institute, an industry group, released data showing a 9.2 million-barrel rise in gasoline stocks and a 4.3 million-barrel increase in distillate inventories for the week ended Dec. 1, even as crude stocks came down by 5.5 million barrels.

"We were overdue a little bit of profit-taking and the build up in gasoline inventories was the perfect excuse to do just that," said Michael Hewson, chief market analyst at brokerage CMC Markets.

After last week's highly-anticipated meeting between Organization of the Petroleum Exporting Countries and its allies, Mr. Hewson said, crude prices are "probably going to drift a little bit lower" as the market refocuses on the "age-old debate about supply and demand."

OPEC and 10 major producers outside the cartel, including Russia, agreed Thursday to extend a deal to hold down crude output by nearly 2% through the end of next year. An extension was largely priced in by the market and prices have reacted tepidly to the official decision.

The accord was first struck a year ago with the aim of draining the global oil glut and boosting prices. Initially the efforts had little impact, but prices began to rise in the second half of the year amid higher compliance with the production curbs and stronger global demand. Crude prices have risen more than 20% since September.

Oil-market observers will be watching closely Wednesday for official weekly data from the U.S. Energy Information Administration.

"Attention will no doubt be focused not only on inventories but also on U.S. crude oil production," according to analysts at Commerzbank. U.S. output is "likely to have increased further, possibly reaching 9.7 million barrels per day for the time on a weekly data basis," the analysts wrote in a note Wednesday.

Among refined products, Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was down 0.95%, at $1.70 a gallon. ICE gasoil, a benchmark for diesel fuel, changed hands at $554.75 a metric ton, down 0.31% from the previous settlement.

Write to Christopher Alessi at christopher.alessi@wsj.com

Oil prices fell to a three-week low on Wednesday after government data showed a steep rise in U.S. fuel inventories.

Light, sweet crude for January delivery fell $1.66, or 2.9%, to $55.96 a barrel on the New York Mercantile Exchange, the largest one-day dollar drop since July. Brent, the global benchmark, lost $1.64, or 2.6%, to $61.22 a barrel, closing at a one-month low.

On Wednesday, the U.S. Energy Information Administration reported a build of 6.8 million barrels in gasoline inventories in the week ended Dec. 1, exceeding analyst expectations for a 1.7 million barrel increase.

While crude inventories dropped by 5.6 million barrels last week, the data raised concerns about gasoline demand in the U.S. and put pressure on energy markets across the board, analysts said.

"It does reinforce people's questions about how robust U.S. gasoline demand is," particularly around the holidays, said John Saucer, vice president of research and analysis at Mobius Risk Group. "From a seasonal point of view, it usually does pretty well."

Analysts noted that the oil market looked vulnerable following a build up of bullish bets ahead of a meeting between the Organization of the Petroleum Exporting Countries and other major producers last week.

On Thursday, OPEC and 10 countries outside the cartel including Russia agreed to extend production cuts through the end of 2018, largely meeting analyst expectations.

"We were overdue a little bit of profit-taking and the build up in gasoline inventories was the perfect excuse to do just that," said Michael Hewson, chief market analyst at brokerage CMC Markets.

Meanwhile, the high level of stockpiles in the U.S. and increasing production from shale companies have threatened to undermine prices. According to the EIA, domestic production rose to a fresh weekly record last week, churning out more than 9.7 million barrels a day.

Weakness in gasoline and distillate markets could exacerbate selling in crude, said Mark Waggoner, president of Excel Futures.

"That has the potential to tip the balance of everything into a very bearish mode," Mr. Waggoner said. "It's too early to say this is the end of the longer-term bull trend, but it's getting very close."

Gasoline futures fell 3.3% to $1.6609 a gallon and diesel futures lost 2.7% to $1.8613 a gallon.

Christopher Alessi contributed to this article.

Write to Stephanie Yang at stephanie.yang@wsj.com

(END) Dow Jones Newswires

December 06, 2017 15:42 ET (20:42 GMT)