Wells drilled since 2014 now account for almost half of all U.S. crude production, according to a new report by the U.S. Energy Information Administration.
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Crude inventories rose by 9.4 million barrels in the last week to their another consecutive record, three times larger than analysts’ expectations for an increase of 3.1 million barrels.
“That huge build in crude inventories really suggests that, although we ve had some relief, the overall supply situation remains imbalanced”, said Sydney-based CMC Markets strategist Michael McCarthy. That marked the sharpest one-day drop for the front-month contract in USA crude since February 11.
The report, published on Tuesday, found that US crude oil production from new wells in the Lower 48 accounted for about 48 percent of total USA crude production in 2015, up from 22 percent in 2007.
The West Texas Intermediate for May delivery moved down 1.66 USA dollars to settle at 39.79 dollars a barrel on the New York Mercantile Exchange, while Brent crude for May delivery decreased 1.32 dollars to close at 40.47 dollars a barrel on the London ICE Futures Exchange.
Oil prices have rallied about 50 percent over the past two months.
“A recovery built on fickle risk appetite and temporary supply disruptions has gotten ahead of itself, and a pullback is expected”, said Mike Wittner, global head of oil research at Societe Generale. Stockpiles at Cushing, Oklahoma, the biggest US oil-storage hub, dropped 1.26 MMbbl from a record high.
Traders such as Vitol, Gunvor and Glencore are betting on oil markets remaining oversupplied for at least two more years.
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Renewed optimism that producers, including members of the OPEC cartel, would strike a deal to freeze output at a meeting in Doha on April 17 had also buoyed prices.
