Crude prices fall on sticky worries about oversupply
London (May 11) Oil prices fell Wednesday after an industry group reported a higher-than-expected increase in U.S. crude stockpiles, extending recent volatility on the market.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in June CLM6, +0.09% lost 35 cents, or 0.8%, to $44.31. July Brent crude LCON6, +0.59% on London’s ICE Futures exchange fell 16 cents, or 0.4%, to $45.36 a barrel.
The losses came after the American Petroleum Institute on Tuesday reported an increase of 3.4 million barrels in U.S. crude stocks for last week. The U.S. Energy Information Administration will release its data later Wednesday and analysts surveyed by The Wall Street Journal expect the figures to show a 400,000-barrel increase in U.S. inventories last week.
U.S. crude stocks are already at an eight-decade high, despite signs of a steady production decline in recent months. Output has fallen from a peak of 9.7 million barrels a day in April 2015 to below 9 million at present. The EIA will publish its latest production estimate later Wednesday.
Prices have fluctuated in recent days as investors weighed the impact of production outages around the globe on the persistent surplus of crude.
“This week has seen huge intraday volatility as markets are trying to determine direction of oil prices,” said Michael Poulsen, oil analyst at Global Risk Management. “News is mixed: supply outages in Canada, Libya and Nigeria continue, but on the other hand, U.S. oil inventories could be around all-time highs if the API data is confirmed by the EIA this afternoon.”
In Canada, companies are preparing to restart oil production in the coming days after being affected by wildfires. More than a million barrels a day have been offline due to the fires in the oil-rich province of Alberta, which has supported prices in recent days.
“The situation in Alberta is stabilizing with reports of restarting oil sands production around the Fort McMurray area,” said analysts at JBC Energy.
Read: As wildfire threat eases, Canada hopes to ramp up oil-sands operations
The Canadian disruptions have added to a spate of outages around the globe due to political strife in Libya and a series of attacks on Nigerian oil facilities.
Analysts say that these disruptions are likely to be short lived and the market remains oversupplied, underpinned by ballooning output by major producers such as Saudi Arabia and Iran, who are locked in a heated battle for market share.
Nymex reformulated gasoline blendstock RBM6, +0.60% — the benchmark gasoline contract — fell 0.3% to $1.48 a gallon. ICE gasoil changed hands at $398.25 a metric ton, up $3.5 from the previous settlement.