Oil Prices Slide After EIA Report Shows Rise in U.S. Supplies
Oil prices fell after government data showed that crude supplies in the U.S. unexpectedly grew last week as exports declined and production increased.
The U.S. Energy Information Administration reported that the amount of stored oil rose by 2.2 million barrels last week, compared with the 2.1 million barrel draw that analysts surveyed by The Wall Street Journal were expecting.
U.S. crude futures fell 39 cents, or 0.68%, to $56.81 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 20 cents, or 0.31%, to $63.49 a barrel on ICE Futures Europe.
Oil prices have been on the rise in recent weeks, trading at two-year highs on the back of strong demand, escalating tensions in the Middle East, and indications that supplies are becoming tighter following more than 10 months of production cuts by some of the world's largest producers and exporters.
But Wednesday's U.S. data included some worrying signs for oil bulls. Exports of U.S. crude dropped sharply, from a record of 2.1 million barrels a day to just 869,000 barrels a day. U.S. crude has been trading at a steep discount to the global benchmark, which has fueled a surge of shipments. If exports continue to slow, it could lead oil to start backing up in U.S. storage tanks again.
"For the bears, there's definitely some pickings -- there's something they can at least put their hat on for now," said Andy Lebow, senior partner at Commodity Research Group. "There hasn't been very much for them over the last few weeks."
U.S. oil output ramped up last week, in a possible sign that producers are prepared to shift into higher gear to take advantage of the stronger prices. U.S. production rose by 67,000 barrels a day to 9.62 million barrels a day -- the highest weekly figure on record in EIA data going back to 1983.
"People have been wondering whether [higher prices] will bring new barrels on board. The proof is in the pudding here right now," said Bob Yawger, director of the futures division of Mizuho Securities USA.
Prices dropped after the data were released, falling by more than 1% before paring losses and at times flipping to gains. Gasoline and diesel supplies fell by more than analysts were expecting in the EIA data, and total stockpiles of crude and petroleum fell by 9.1 million barrels amid stronger demand.
"Product strength at this time of year is a little unusual to say the least. It's actually pretty good," Bill O'Grady, chief market strategist at Confluence Investment Management, said of the data.
But also weighing on the market were Chinese customs data released Wednesday morning that showed oil imports at roughly 7.3 million barrels a day in October, down from 9 million barrels a day the month prior -- the "weakest monthly imports seen since October 2016," according to Dutch bank ING Groep.
Giovanni Staunovo, a commodities analyst at UBS Wealth Management, called China's import contraction surprising.
"Considering that China was one of the countries removing excess production from the market, there is a concern if this trend continues," he said.
Gasoline futures rose 0.6 cent, or 0.33%, to $1.8213 a gallon. Diesel futures rose by 0.03 cent, or 0.02% to $1.9216 a gallon.
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(END) Dow Jones Newswires
November 08, 2017 15:48 ET (20:48 GMT)