Oil Prices Are Plunging Amid A Shocking Inventory Build-Up (USO)

Jon Howard
November 18, 2017

"Oil shrugged off an unexpected rise in the U.S. crude inventory data...."

Consumer price inflation minus food and energy rose slightly in October while retail sales were a bit higher, according to government data.

U.S. West Texas Intermediate and international-benchmark Brent crude oil finished lower on Thursday as expectations that OPEC would extend production cuts were offset by the impact of rising U.S. crude production and inventories.

Brent crude futures, the global benchmark for oil prices, were at $61.98 a barrel at 4.38am GMT, 11c above their last close.

The Energy Information Administration (EIA) stated on Wednesday that the availability of crude oil as well as gasoline in the nation unexpectedly rose last week, making this its second consecutive week of increase.

Crude imports were up 261,000 barrels per day (bpd) to 7.9 million bpd last week, seeing that exports rose 260,000 bpd to 1.1 million bpd.

Analysts in a Reuters poll had expected a decrease of 2.2 million barrels.

Oil rises amidst expected extension of OPEC cuts

"After all, the need to further extend the agreement shows that the strategy is not working", commodity researchers at Commerzbank said, adding that the "key factor" was rising US shale oil output.

The recent gains recorded by global oil prices have slipped as the commodity has lost more than $2 in seven days.

Oil has eased after reaching a two-year high last week on signs of tightening supplies and speculation the Organization of Petroleum Exporting Countries and its allies will extend output curbs past the end of March. As of November 7, long positions in crude oil outnumbered short positions by 317,806 contracts, the highest since April 18.

Demand prospects have also dimmed this week, further weighing on the market. The IEA revised downward its forecast for oil demand in 2017 by 50,000 bpd and in 2018 by 190,000 bpd.

OPEC is expecting that inventories would rapidly go down by 670,000 barrels a day through the year if they maintain the supply limit. "Brent would break back below $60 a barrel". This "is likely to once again result in builds in broader petroleum inventories", Mr. Loewen wrote on Tuesday. Refinery utilization rates rose by 1.4 percentage points.

Distillate stockpiles, which include diesel and heating oil, fell by 799,000 barrels, versus expectations for a 1.3 million-barrel drop, the EIA data showed.

-Christopher Alessi contributed to this article.

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