Thursday, 25 August 2016

Oil Prices Fall on Record U.S. Inventories

Oil prices slid Wednesday after weekly inventory data showed U.S. stockpiles of crude oil and
petroleum products at a record high. U.S. commercial stockpiles of crude oil and refined products increased by 6.6 million barrels in the week ended Aug. 19 to a record 1.4 billion barrels, the Energy Information Administration said, an indication that the global glut of crude that has weighed on prices for two years has yet to fully shrink. U.S. crude for October delivery fell $1.33, or 2.8%, to $46.77 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, fell 91 cents, or 1.8%, to $49.05 a barrel on ICE Futures Europe. Crude-oil stockpiles rose by 2.5 million barrels in the latest week. Analysts surveyed by The Wall Street Journal had expected that crude supplies fell slightly in the week. 
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Oil prices are up more than 10% this month, buoyed by anticipation that the major exporting countries might agree on a deal to freeze production. After such a strong rally, “it is not entirely unexpected for traders to use the supply build as a reason to take some profits off the table,” analysts at optionsXpress said in a note. Stockpiles of distillate fuels including diesel, propane and ethanol also rose. “There was nothing bullish in this data,” said Donald Morton, senior vice president at Herbert J. Sims & Co. Even as demand for petroleum products has risen, “there is no shortage. None,” he said.  

Gasoline futures settled higher, buoyed by concerns that a tropical wave in the Atlantic Ocean could develop into a storm over the Gulf of Mexico, threatening the many refineries located in the region. Gasoline futures settled up 1.08 cents, or 0.7%, at $1.5096 a gallon. Diesel futures fell 0.55 cent, or 0.3%, to $1.4963 a gallon.  

U.S. crude production fell by 49,000 barrels in the week to 8.5 million barrels a day, the EIA said. Domestic production unexpectedly rose last week, but the EIA attributed the increase to a “re-benchmarking” of its data. Analysts are closely watching output estimates to see whether this spring’s rally that pushed oil prices above $50 a barrel enabled companies to increase production.  

Prices rose Tuesday on reports that Iran is set to participate in a meeting of Organization of the Petroleum Exporting Countries members in September to discuss taking coordinated action to raise oil prices. Major producers failed to reach an agreement to freeze production at talks in April, due largely to Iran’s unwillingness to cooperate.

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