Oil prices edge up on falling US crude stocks, but global glut still weighs
SINGAPORE (Reuters) – Oil prices edged up on Wednesday on a fall in US crude inventories, although markets were still being weighed down by general oversupply.
Brent crude futures were at $51.02 per barrel at 0218 GMT, up 22 cents or 0.4 percent from their last close. US West Texas Intermediate (WTI) crude futures were at $47.70 a barrel, up 15 cents, or 0.3 percent.
US crude inventories fell by 9.2 million barrels in the week to Aug. 11 to 469.2 million, industry group the American Petroleum Institute said on Tuesday. That compared with analyst expectations for a decrease of 3.1 million barrels. “The market took this as a mildly bullish report,” said William O’Loughlin, investment analyst at Rivkin Securities.
However, gasoline stocks climbed by 301,000 barrels, compared with analyst expectations in a Reuters poll for a 1.1 million barrel decline. Official Energy Information Administration (EIA) data will be published late on Wednesday.
More broadly, analysts said ample supplies were preventing prices from moving much higher. “It is the ongoing fundamental issue of excessive supply that is continuing to weigh on oil prices… Not a lot has changed despite the OPEC and Russia efforts recently. While these producers have tried to limit their oil output, US shale oil continues to rise,” said Fawad Razaqzada, market analyst at futures brokerage Forex.com.
The Organisation of the Petroleum Exporting Countries together with non-OPEC producers like Russia has pledged to restrict output by 1.8 million barrels per day (bpd) between January this year and March 2018.
Offsetting much of that effort, however, US oil production has soared by almost 12 percent since mid-2016 to 9.42 million bpd. C-OUT-T-EIA
On the demand side, analysts also see a gradual slowdown in consumption growth as gasoline demand peaks in the United States due to improving fuel efficiency and the rise of electric vehicles, while China’s voracious oil thirst also starts to taper off.
The crude forward price curve shows that the market condition known as contango, when it is profitable to store oil for later sale and which is seen as an indicator of oversupply, no longer applies.
Yet neither is the curve in backwardation, which would make it profitable to sell oil immediately and which is seen as a healthy market for producers.
“OPEC and Russia still face an uphill battle in reducing the global supply surplus in the face of growth in output elsewhere (US shale oil, Libya, Nigeria) and less than compliant behaviour in their midst (Iraq, UAE),” French bank BNP Paribas said in a note.