• Friday, March 29, 2024
businessday logo

BusinessDay

Oil slides as US stockpiles grow

Oil slides as US stockpiles grow

Crude prices renewed their recent slide on Wednesday, as traders weighed the outlook for supply after closely watched US data showed a surprise build in domestic stockpiles. Brent crude fell 1.8 per cent to $61.15 a barrel in morning trading in New York, leaving the benchmark on track for its fourth consecutive weekly fall after numbers released on Tuesday showed a rise in US inventories.

US marker WTI fell 2.1 per cent to $52.15, putting it on track to close in a fresh bear market. The Energy Information Administration said US crude inventories rose 2.2m barrels to 485.5m, bucking forecasts for a decline of 481,000 barrels, according to Reuters. Gasoline stocks grew slightly more than expected, sending futures in New York more than 2 per cent lower.

The figures followed a report late Tuesday by the American Petroleum Institute, which also showed US crude stocks continued to swell and sent crude prices sliding overnight. “This data print will likely cause a sleepless night for oil bulls as if the EIA data confirms, we could see a more significant cut and run on WTI oil positioning,” said Stephen Innes, managing partner at Vanguard Markets, following the API’s report.

Oil has traded in sharp swings in recent months, and has fallen about 18 per cent since late April,
having rallied from $50 to $75 between January and April. Traders are weighing an effort by Opec and its allies to prop up prices by cutting output, while US sanctions on Iran and Venezuela have also tightened supplies.  But set against these factors concerns a wider US trade conflict and global slowdown have weighed on prices, while the US shale industry is also expected by some traders to quicken its growth.

The EIA, in a report published on Tuesday, cut its outlook for global oil demand in 2019. The
agency also lowered projections for US crude production, but the nation’s output is still expected to set new annual records this year and next.

“Just the thought of overproduction in this deteriorating global economic environment suggests unless Opec and allies can bridge the agreement gap markets will head south in a hurry,” Mr Innes said. A top oil trader earlier this month told the Financial Times that the oil market “is as complicated as I have seen it in a long time.”

Doug King, the senior trader at London-based hedge fund Merchant Commodity Fund, said there was still great uncertainty over the prospect for prices.