Oil Lower After U.S. Stockpiles Data
May 24 2017 - 12:48PM
Dow Jones News
By Alison Sider and Jon Sindreau
Oil prices turned lower Wednesday after a
smaller-than-anticipated drop in gasoline stockpiles renewed
concerns about demand heading into summer driving season, even as
OPEC officials in Vienna signaled they are likely to extend output
cuts into next year.
Memorial Day weekend typically kicks off a period of high demand
for fuel in the U.S., when drivers take to the roads for summer
travel.
But the U.S. Energy Information Administration reported
Wednesday that gasoline stockpiles dropped by just 787,000 barrels
last week, compared to a 1 million barrel decrease forecast by
analysts and traders surveyed by The Wall Street Journal.
"That draw is not up to par, and it disappointed accordingly,"
said Bob Yawger, director of the futures division of Mizuho
Securities USA Inc. "It really has pulled the rug out from under
the energy market here," he said.
The move lower could put an end to a five day streak of
gains--the longest for oil prices since April.
U.S. crude futures recently fell 13 cents, or 0.25%, to $51.34 a
barrel on the New York Mercantile Exchange. Brent crude, the global
benchmark, fell 7 cents, or 0.13%, to $54.08 a barrel on ICE
Futures Europe.
Gasoline futures fell 1.16 cents, or 0.7%, to $1.6598 a gallon.
Diesel futures fell 0.16 cent, or 0.1%, to $1.6051 a gallon.
Worries about anemic demand for fuel outweighed a 4.4 million
barrels decrease in crude stockpiles, double the drop predicted by
analysts surveyed by The Wall Street Journal were anticipating and
the seventh straight week of declining inventories.
Many market observers have been anxiously waiting for bloated
U.S. stockpiles to shrink, as an indicator that production cuts by
the Organization of the Petroleum Exporting Countries and other
major exporters are chipping away at the global oil glut.
Oil has been on a roller-coaster ride since March, torn between
concerns about mounting stockpiles and greater optimism regarding
global demand. It has gained roughly 5% this month, buoyed by
reports that Saudi Arabia is garnering support within OPEC for a
potential nine-month extension of ongoing production cuts.
In Vienna, Iraq oil minister Jabbar al-Luaibi said Wednesday
that he supports extending the cuts for another nine months. Iraq
has been seen as a possible hold out to extending the deal. A joint
committee comprised of OPEC and non-OPEC members also recommended
extending the cuts for nine months.
If confirmed, "we will see a bounce in the market very quickly,"
said OM Financial's Stuart Ive, as "there are plenty of reasons to
think that demand will be increasing." He thinks oil could get
toward $65 by year's end provided there is compliance by all
participants to the output cuts.
Members of the cartel want global inventories to fall back to
their five-year average, analysts say, in order to ease fears about
an oversupply in the market. In the long term, however, traders
remain concerned that U.S. shale producers can ramp up production
to offset any cuts by OPEC.
"The ability of the U.S. shale sector to revive itself,
restructure at a corporate level, and bring back on tap incremental
oil production is a deep challenge to OPEC's oil price policy,"
said Nizam Hamid, head of strategy in Europe at WisdomTree
Investments Inc.
Biman Mukherji contributed to this article
Write to Alison Sider at alison.sider@wsj.com
(END) Dow Jones Newswires
May 24, 2017 12:33 ET (16:33 GMT)
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