Oil Falls as U.S. Production Rises
December 13 2017 - 3:43PM
Dow Jones News
By Alison Sider and Sarah McFarlane
Oil prices slid for a second day Wednesday after U.S. data
showed that fuel inventories rose and production increased.
And Brent prices fell as concerns eased about the impact of the
shutdown of a major pipeline system in the North Sea.
U.S. crude futures fell 54 cents, or 0.95%, to $56.60 a barrel
on the New York Mercantile Exchange. Brent, the global benchmark,
fell 90 cents, or 1.42%, to $62.44 a barrel on ICE Futures
Europe.
Crude oil stockpiles fell by 5.1 million barrels last week.
Analysts attributed that to strong demand from refiners, but a lot
of the gasoline they churned out didn't end up being consumed.
Gasoline inventories climbed by 5.7 million barrels last week.
"There's a concern that drops in crude stocks are being put into
fuel [storage] tanks. That doesn't make a real picture for strong
demand," said Gene McGillian, research manager at Tradition
Energy.
Fuel prices fell sharply. Gasoline futures fell 5.09 cents, or
3%, to $1.6467 a gallon. Diesel futures fell 2.92 cents, or 1.51%,
to $1.9044 a gallon.
Also weighing on prices, U.S. crude output rose by 73 million
barrels a day to 9.78 million barrels a day -- a fresh weekly
record -- raising the prospect that shale producers will offset
extended production cuts by the Organization of the Petroleum
Exporting Countries and other major producers. Output has increased
for eight weeks in a row.
"The big picture is that U.S. oil production is at record levels
and growth is showing few signs of slowing," analysts at Capital
Economics wrote.
That might be scaring bullish investors out of the market, said
Tariq Zahir, managing member of Tyche Capital Advisors. Investors
built up record net long positions in oil contracts in recent weeks
in the run-up to the decision by OPEC and its partners to continue
cutting output through the end of next year.
"With U.S. production going up again, stubbornly, is that going
to affect OPEC members going forward?" Mr. Zahir said. "Some weak
longs may be getting out."
Oil prices, particularly the Brent benchmark, jolted higher
earlier this week after Ineos, a chemical company, announced that
it was shutting down its Forties Pipeline System for a few weeks to
repair a leak. That will stop the flow of some 450,000 barrels a
day of North Sea oil output, forcing producers to shut in
production.
But Brent prices have fallen after briefly surging above $65 a
barrel Tuesday as investors took profits and concerns about the
duration and impact of the outage eased. Brent prices have fallen
3.48% over the past two sessions -- their largest two day decline
since July 5.
Analysts at Société Générale said Wednesday that despite the
disruption to the Forties system, there is still plenty of oil
available.
"Our view is that further upside due to this event is limited;
from current price levels, we believe the downside is bigger. The
bottom line is that we would currently be a seller, not a buyer, of
Brent," the analysts wrote.
Write to Alison Sider at alison.sider@wsj.com and Sarah
McFarlane at sarah.mcfarlane@wsj.com
(END) Dow Jones Newswires
December 13, 2017 15:28 ET (20:28 GMT)
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