With this week’s crude inventory to miss forecasts (8.0m versus forecasts at 3.5m) as a result, last week’s $50.13 per barrel (WTI reached its highest price in almost three months) has been unable to hold these gains.
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US crude stocks surged sharply for a second week, climbing 8 million barrels in the week to October 16, data from the U.S. Department of Energy’s Energy Information Administration (EIA) showed on Wednesday.
“There was a ideal excuse yesterday to send oil through $45 after the bigger-than-expected rise in inventories”, Ole Sloth Hansen, an analyst at Saxo Bank, said by e-mail from Copenhagen. “That did not happen and it could potentially signal that traders are looking to pick up contracts at the bottom of the range that has prevailed since early September”.
But that arbitrage opportunity only works if Brent crude oil prices are significantly higher than WTI. “Another drop this week would likely cause production to drop below 9 million barrels per day (bpd) which would be taken as a bullish sign”, the note said.
Stagnating rig productivity shows US shale oil producers are running out of tricks to pump more with less, pointing to a slide in output that should help rebalance global markets, commentators said.
USA benchmark West Texas Intermediate for delivery in December was up 20 cents to $45.58 and Brent crude for December gained 39 cents to $48.47 at around 6:45 a.m. local time.
Interestingly, Direxion data indicate traders have recently favored DRIP to GUSH as over the past 30 days, the former has seen positive creation activity while the latter has averaged outflows on a day-to-day basis. The European benchmark crude was at a premium of $3.14 to WTI. Analysts had expected a 3.9 million barrels increase.
This was, I suppose, a good move back then and remained so for about 10 years, but things have changed and domestic demand has increased, as well as imports of “foreign” oil and these prices were not Made in the United States of America, but were set by… you guessed it… Prices are down 4.2 per cent for the week.
In a bid to defend their market share, OPEC members, and other oil heavyweights like Russian Federation, have refused to trim production, despite the oversupply.
Organisation of Petroleum Exporting Countries (Opec) is unlikely to adjust its production quota, according to Ryan Lance, chief executive officer of ConocoPhillips.
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A meeting of oil experts from OPEC and non-member countries ended on Wednesday without any concrete price support measures despite discussing the risk low oil prices would have on investment in new supplies.
