February 21, 2018, by Rakteem Katakey and Heesu Lee
Oil dropped as U.S. stockpiles were forecast to have expanded for a fourth week, raising questions about OPEC’s success in draining a global oversupply.
Crude in New York lost as much as 1.4 percent. Inventories in America rose by 3 million barrels last week, according to a Bloomberg survey. Oil has struggled to regain January’s highs as equities remain weak and a stronger dollar reduces the appeal of commodities priced in the U.S. currency.
The Organization of Petroleum Exporting Countries has reiterated not just its commitment to rebalancing the oil market, but possibly even extending the alliance with Russia beyond this year. Yet, traders’ are primarily focused on U.S. supplies, according to Saxo Bank A/S.
“U.S. inventories, which are surveyed to show a rise, together with weaker stocks and a stronger dollar, are pushing oil lower,” said Ole Hansen, head of commodities strategy at Saxo. “It could signal some renewed short-term weakness.”
West Texas Intermediate for April delivery fell 72 cents to $61.07 a barrel on the New York Mercantile Exchange as of 10:09 a.m. London time. Total volume traded was about 18 percent below the 100-day average. The March contract expired Tuesday after adding 22 cents to $61.90.
Brent for April settlement slipped 69 cents to $64.56 a barrel on the London-based ICE Futures Europe exchange. Prices dropped 0.6 percent to $65.25 on Tuesday. The global benchmark traded at a $3.49 premium to WTI.
The outlook for U.S. oil production in both 2018 and 2019 is “phenomenal,” Deputy Energy Secretary Dan Brouillette said in an interview Tuesday. The nation’s crude inventories have rebounded since late January and kept above 420 million barrels this month, according to Energy Information Administration data.
The EIA is scheduled to release its latest inventory report Thursday, a day later than usual due to the U.S. Presidents Day holiday earlier this week. Weekly figures from the American Petroleum Institute, an industry group, are due later today.
The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, rose 0.2 percent for a fourth day of gains. The MSCI World Index, which tracks equities, dropped 0.5 percent.
Production at the U.S. Permian oil field is set to rise for an 11th straight month to a record in February, according to a forecast from consultant Rystad Energy. The United Arab Emirates will deliver at least 100 percent of supply cuts this year, Energy Minister Suhail Al Mazrouei told reporters in London. OPEC compliance with the curbs is strong, while non-OPEC adherence is slipping. Nymex gasoline futures were down 0.9 percent to $1.7339 a gallon Wednesday.