Crude oil prices drifted lower in early Thursday trading as investors remained cautious about USA economic trajectory ahead of a pivotal vote on health insurance.
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West Texas Intermediate for May delivery dropped 20 cents, or 0.4 percent, to settle at $48.04 a barrel on the New York Mercantile Exchange.
Benchmark Brent crude oil settled at $50.56 a barrel, down 8 cents on the day. Gasoline supplies fell by 2.8 million barrels, while distillate stockpiles declined by 1.9 million barrels last week, according to the EIA. Reports suggest that Saudi Arabia, which holds sway over OPEC’s decisions and will be attending the weekend meeting, could hold fellow producers’ feet to the fire on the issue of compliance. The Crude Stocks were reported at 5.0M in the previous week, much higher versus the 1.9M estimate, the indicator has come back in the positive territory after one week.
Crude supplies climbed by 4.95 million to 533.1 million barrels.
USA crude oil production decreased over the first three quarters of 2016 from 9.2 million barrels per day (b/d) in January to 8.6 million b/d in September.
The data offered mixed messages to the market.
Refinery crude runs rose 329,000 bpd as utilization rates rose 2.3 percentage points to 87.4 percent of capacity, led by higher runs at U.S. Gulf Coast and Midwest refiners.
OPEC’s latest monthly report showed global oil stocks in January rose to 278 million barrels above the five-year average.
Rising production in the United States and elsewhere, and bloated inventories, are undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut output and prop up prices.
Based on days of supply, inventories now sit at the highest levels in six years.
“With U.S. crude stocks continuing to mount into record territory both in total and at Cushing following nearly two months of OPEC production restraint, we feel that the odds of a gradual unraveling in the OPEC agreement have been increased significantly”, Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.
Exports, meanwhile, “continue to drop, amid an apparent lack of demand for light US crude”, he said, adding that “the global market wants heavier crude to offset lost OPEC barrels”.
Unless OPEC extends the curbs beyond June or makes bigger cuts, traders say oil prices are at risk of falling further.
Oil prices are still under pressure by high levels of crude stocks, not only in the USA, but also around the world.
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Since the beginning of this year, OPEC has cut output by 1.8 million barrels. He said growth in demand for crude in 2017 was expected to rise faster than the long-term average of 1.2 million bpd. This inverse relationship was also seen in smaller magnitudes in the following months.
