Oil struggles ahead of producers’ meeting, data
London (Oct 21) Oil prices fell on Wednesday ahead of key U.S. supply data expected to show another increase in crude inventories and a meeting by some of the world’s top crude producers.
Investors are bracing for the latest report by the U.S. Energy Information Administration which will publish its inventory data later on Thursday. Late Tuesday, the American Petroleum Institute, an industry group, estimated that inventories rose by 7.1 million barrels last week.
That was a larger increase than investors expected, with analysts surveyed by The Wall Street Journal forecasting the EIA data to show an increase of 3.5 million barrels a day. Last week, the EIA reported a 7.6 million-barrel jump in stockpiles in another bearish sign for the market and underscoring the mismatch between supply and demand.
“A larger-than-expected inventory could pose a significant downside risk for current oil prices forecasts,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Also on Wednesday, the meeting between members of the Organization of the Petroleum Exporting Countries and non-members such as Russia and Mexico is unlikely to result in any production cutbacks despite the large supply overhang that has depressed oil prices since last year.
Brent crude LCOZ5, -0.51% the global oil benchmark, fell 0.5%, or 23 cents, to $48.48 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLZ5, -1.19% were trading down 1.3%, 63 cents, at $45.66 a barrel.
Oil briefly rose above the $50-a-barrel mark this month after a string of oil executives and OPEC officials hinted that a price recovery was on the horizon. But strong production data, including from OPEC itself, and expectations of Iranian oil returning to the world market rattled market confidence.
OPEC and non-OPEC members said that ways to support prices, including production cutbacks, will be discussed at the meeting in Vienna on Wednesday. However, few in the market expect any meaningful action as big producing nations have enacted a policy of pumping crude at a rapid pace in a bid to defend their market share.
“Russia and other countries don’t show any indication to decrease supply, which is crucially needed to balance still oversupplied oil market,” Hansen said.
One of the main reasons for the oversupply, production in the U.S. has peaked this April, at 9.6 million barrels a day, and has fallen to below 9.1 million barrels a day since as companies have idled drilling rigs and shelved projects amid the slump in prices. The EIA will release its weekly estimate of U.S. oil production along with the inventory report.
“Prices would be given a boost if it were to dip below the 9 million barrel per day mark,” analysts at Commerzbank said in a note to clients.
Nymex reformulated gasoline blendstock RBX5, -0.54% —the benchmark gasoline contract—fell 0.9% to $1.27 a gallon. ICE gasoil changed hands at $443.25 a metric ton, up 50 cents from the previous settlement.