Crude Oil Falls Further On Massive API Inventories Build

Demand for transportation infrastructure has accompanied increased US crude oil production in recent months, EIA reported.

On the New York Mercantile Exchange crude futures for December delivery inched up 0.02% to $55.34 a barrel, while on London's Intercontinental Exchange, rose 0.10% to $61.94 a barrel.

Meanwhile, the American Petroleum Institute (API) reported a massive build of 6.513 million barrels of United States crude oil inventories, more than triple analyst expectations.

Analysts said rising US stockpile combined with downbeat global demand outlook renewed investors' concern about lingering global glut. "Both contracts eked out small gains", said Jeffrey Halley, senior market analyst at futures brokerage Oanda in Singapore. Increased refining rates could eventually reduce crude inventories. "Although more infrastructure to export crude oil has been built recently, USA exporters must still use smaller, less-economic vessels or complex shipping arrangements, which add to costs". West Texas Intermediate crude have both shed about $3 a barrel, or almost 5 percent, from more than two-year highs struck last week.

The benchmarks have dipped from earlier in the month, when a surfeit of buying from funds, bolstered by expected strength in demand and momentum from the ongoing rally, boosted prices to two-year highs.

"It's started to look like there's a little bit too much momentum, and the quality of the buyer coming into the market at the $56 to $57 level wasn't the smartest crude oil money", said Richard Hastings, macro strategist at Seaport Global Securities in Charlotte.

"The oil market faces a hard challenge in 1Q18 with supply expected to exceed demand by 600,000 bpd followed by another, smaller, surplus of 200,000 bpd in 2018".

OPEC and other big producers including Russian Federation agreed a year ago to cut crude output by 1.8 million barrels per day (bpd) to try to bolster prices. Also, supplies are likely to exceed that level, particularly as USA production continues to rise.

Crude oil prices edged up in Asia on Thursday as investors saw a recent sell-off overdone and continued to monitor declining production from OPEC member Venezuela as it reels from a debt and inflation crisis.

The IEA said non-OPEC production would rise 1.4 million bpd in 2018, undermining efforts by the Organization of the Petroleum Exporting Countries and other producers to limit global crude supplies and support prices.

That deal is due to expire at the end of March 2018 but ministers have signaled that they are likely to extend the agreement, possibly until the end of next year.

  • Eleanor Harrison