Oil Drops as US Inventories Rise | Rigzone
Wednesday, November 27, 2019
Oil sinks as production hits a record high and refinery demand slips, pushing stockpiles higher across the nation.
(Bloomberg) — Oil sank as production hit a record high and refinery demand slipped, pushing stockpiles higher across the nation.
Futures fell as much as 1.4% in New York after Energy Information Administration reported that U.S. commercial crude inventories rose 1.57 million barrels last week and output reached 12.9 million barrels a day. That countered optimism that a U.S.-China trade deal was drawing closer, which may support stronger economic growth and fuel demand.
“Given the time of the year, we anticipated refinery utilization to tick back up as we come through the fall and turnaround season, so this was a surprise build,” Brian Kessens, portfolio manager at Tortoise, a Kansas firm that oversees more than $21 billion in assets.
Crude has been rising since early October on the thaw in trade hostilities between the world’s two largest economies, although investors are becoming increasingly fatigued over how long the negotiations are taking. President Donald Trump told reporters at the White House that the U.S. and China were “in the final throes of a very important deal,” though he told Fox News later that he was holding up the agreement to ensure better terms for America.
While some sort of pact would be positive, it may not do much to revive oil demand unless existing tariffs are rolled back. The market has heard these trade talks before and “isn’t giving as much credit to the rhetoric and the Trump administration” today, Kessens said.
West Texas Intermediate for January delivery fell 63 cents to $57.78 a barrel at 11:51 a.m. on the New York Mercantile Exchange.
Brent for January settlement fell 48 cents to $63.79 a barrel on the ICE Futures Europe Exchange. The global benchmark crude traded at a $6.01 premium to WTI for the same month.
While the increase was smaller than the 3.64 million reported by the American Petroleum Institute Tuesday, a smaller draw down at the Cushing supply hub and builds in refined products also weighed on crude.
The EIA report also showed gasoline inventories rose 5.13 million barrels while distillate supplies grew by 725,000 barrels. Crude stockpiles stored at the Cushing, Oklahoma, storage hub fell 97,000 barrels.
“The bigger surprise was the gasoline inventories increased pretty meaningfully, which was well ahead where consensus was and a lot of that was due to imports,” Kessens said.
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