Oil prices tumbled to the lowest level in seven months Wednesday, as high oil inventories continued to erode confidence in the ability of major producers to ease a global supply glut, the Wall Street Journal reports.
The US Energy Information Administration reported a smaller-than-expected decline in crude-oil stockpiles last week, pushing prices below US$45 a barrel and to the lowest levels since November. Meanwhile, gasoline stockpiles rose unexpectedly, compounding concerns about low demand for oil products amid an oversupplied market.
Light, sweet crude for July delivery slid US$1.73, or 3.7 percent, to US$44.73 a barrel on the New York Mercantile Exchange, snapping a three-session winning streak and closing at the lowest level since Nov. 14. Brent, the global oil benchmark, fell US$1.72, or 3.5 percent, to US$47.00 a barrel.
Oil has fallen more than 16 percent this year, despite an agreement between the Organization of the Petroleum Exporting Countries and other major oil producers to limit production and cut down an overhang of crude in the market. In May, OPEC and 10 other crude-oil producers agreed to extend the deal to cut output by 1.8 million barrels a month until next March.
However, signs of persistently high crude inventories have derailed their efforts to boost prices.
According to Wednesday data from the EIA, crude-oil stockpiles decreased by 1.7 million barrels in the week ended June 9, falling short of expectations for a 2.6 million barrel drop from analysts and traders surveyed by the Wall Street Journal.
Meanwhile, stockpiles of oil products increased, with gasoline inventories rising by 2.1 million barrels and distillates building by 300,000 barrels last week. Analysts had forecast a 700,000 barrel decline in gasoline inventories and a 600,000 barrel rise in distillates.
That is “really confirming the fact from last week that demand is a lot lower,” said Tariq Zahir, managing member of Tyche Capital Advisors. “It’s been two weeks in a row of surprising unleaded gasoline builds. That doesn’t happen at this time of year.”
On Wednesday, the International Energy Agency said stored oil in industrialized nations—a proxy for global supply—rose by 18.6 million barrels in April. Inventories were 292 million barrels higher than the average over the past five years, said the agency, which advises governments on energy trends. The IEA expects global oil demand to rise by 1.4 million barrels a day in 2018—but non-OPEC supply alone is set to edge up by 1.5 million barrels.
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