Record US Stockpiles Keeping Oil Prices Low

Mar 27, 2017, 00:24
Record US Stockpiles Keeping Oil Prices Low

West Texas Intermediate, the USA benchmark for the price of oil, was down 0.4 percent to $47.86 per barrel.

Analysts said the gains were a sign that the crude benchmarks, trading roughly 12 percent below the highs reached in January this year, had leveled out.

On Monday, rating firm Moody's raised the outlook for the global integrated oil and gas sector from stable to positive, noting that the production curb will allow producers' operating margins to improve as prices increase.

Some say the gush of new USA oil in the market, combined with rising production out of Libya, will leave OPEC little choice but to prolong the production cut plan beyond the initial January-June period.

"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.

Oil ministers from OPEC and some non-OPEC states meet on Sunday in Kuwait, where they are expected to discuss compliance. Total volume traded was about 43 percent above the 100-day average.

Even with murmurings about a possible extension to production cuts implemented by OPEC and non-OPEC members in the first half year, Dhar says that the risk to his average crude price of $US50-60 per barrel this year appear slanted to the downside due to the ongoing lift in United States supply.

Analysts polled by S&P Global Platts had forecast a climb of 2 million barrels for crude supplies, while the American Petroleum Institute late Tuesday reported a 4.5 million-barrel climb.

The U.S. Energy Information Administration on Wednesday reported that domestic crude-oil supplies rose by 5 million barrels for the week ended March 17. USA oil drillers boosted the rig count to 631 last week, the most since September 2015, Baker Hughes data show.

OPEC has broadly met its commitments to reduce output, but non-OPEC producers have yet to fully deliver on pledged cuts and US shale oil producers have been pumping more oil after crude prices recovered from last year's drop below $30.

Crude futures rebounded Thursday after data showed US gasoline and distillates stocks declined in the latest reporting week, signalling that refiners have returned from maintenance and crude demand in the U.S.is set to rise.

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