Oil prices drop as United States inventory rises

Aug 06, 2018, 02:15
Oil prices drop as United States inventory rises

Crude oil prices declined on Wednesday, due to concerns about excess supply in the market after data showed an unexpected jump in USA crude stockpiles.

On Friday, the U.S. Department of Labor reported total non-farm payrolls increased 157,000 in July, lower than the net average gain of 203,000 over the last 12 months.

Crude oil prices drifted lower by 0.78 per cent to Rs 4,697 per barrel in futures trade today as speculators cut bets, driven by a weak trend overseas.

US crude oil production is growing, but at a slower pace than predicted.

The figure for May, based on surveys of producers, is down by almost 300,000 bpd compared to the earlier EIA estimate for 10.749 million bpd oil production for May, with this estimate based on forecasts.

Crude oil futures for September ended down $1.10, or 1.6%, at $67.66 a barrel on the New York Mercantile Exchange.

"The increase in production is aimed at maintaining stability of the (global) oil market within the framework of joint actions of OPEC and non-OPEC countries", Novak said.

Analysts said the outlook beyond the short-term was turning bearish. OPEC has responded with boosting supply, but we are yet to see how much Iranian supply would be choked off, Croft said, adding that "it's going to be very significant".

Official data from Russian Federation on Thursday showed that the country's oil output rose by 150,000 barrels per day (bpd) in July from June to 11.21 million bpd.

Oil prices are also being pressured by concern that global trade tensions could crimp economic growth.

The United States believes Iran is preparing to carry out a major exercise in the Gulf in coming days, apparently moving up the timing of annual drills amid heightened tensions with Washington, U.S. officials told Reuters on Wednesday.

The price jump earlier this summer had come about in large part because of President Donald Trump 's decision to pull the US out of an worldwide agreement to curb Iran's nuclear program.

The combination of crumbling Venezuelan oil production and the aggressive USA efforts to curtail Iranian exports is going to tighten the market.

Trump has turned up pressure on China for trade concessions by proposing a higher 25 percent tariff on $200 billion of Chinese imports. "This could severely dent the competitiveness of US oil and derivatives in the Chinese market", said Abhishek Kumar, senior energy analyst at Interfax Energy.

EIA's latest Short-Term Energy Outlook (STEO) from July forecasts that US crude oil production will average 10.8 million bpd this year, up from 9.4 million bpd in 2017.

That compares with a forecast for a 3-million-barrel decline in a Bloomberg survey of analysts.

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