Oil declines after U.S. crude stockpiles advance in ninth week
NEW YORK (Bloomberg) -- Oil retreated after a government report showed that U.S. crude, gasoline and distillate fuel stockpiles increased.
Crude inventories rose 961,000 bbl last week, according to an Energy Information Administration report Wednesday. Fuel supplies gained as refinery operating rates rose to the highest level since August. Prices climbed 2.7% on Tuesday after Turkey shot down a Russian jet and Saudi Arabia repeated its willingness to stabilize world markets.
Oil has slumped 43% in the past year amid speculation a global glut will be prolonged as the Organization of Petroleum Exporting Countries pumps above its collective target. U.S. crude stockpiles are more than 100 MMbbl above the five-year seasonal average.
"We’re awash with both oil and the products," Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets, said by phone.
WTI for January delivery declined 40 cents, or 0.9%, to $42.47/bbl at 12:07 p.m. on the New York Mercantile Exchange. The contract rose to $42.87 on Tuesday, the highest settlement since Nov. 11. The volume of all futures traded was 19% below the 100-day average.
Brent for January settlement fell 58 cents, or 1.3%, to $45.54/bbl on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $3.07 premium to WTI.
Crude pared losses after the EIA release. The industry- funded American Petroleum Institute was said to have forecast Tuesday a rise in crude supplies of 2.6 MMbbl, more than twice the amount reported by the EIA.
Since 1930
The gain left nationwide U.S. crude supplies at 488.2 MMbbl, the highest level for this time of year since 1930. U.S. crude stockpiles were projected to climb by 1 MMbbl, according to a Bloomberg survey. Inventories at Cushing, Okla., the delivery point for WTI futures, rose 1.74 MMbbl to 58.6 million last week, the most since May.
U.S. refineries operated at 92% of capacity on Nov. 20, up 1.7 percentage point from the prior week. Refiners in the country typically accelerate activity during November after performing maintenance during a low demand period.
Crude Output
Crude production slipped by 17,000 bpd to 9.17 million. That’s down from a four-decade high of 9.61 million reached in June, weekly data show. The gain occurred as the number of active oil rigs in the U.S. dropped to 564, the least in five years, according to data compiled by Baker Hughes Inc.
"We’re still pumping more than 9.1 MMbpd, which is a bit surprising given the drop in the rig count," Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $14.6 billion, said by phone. Production has been more resilient than expected."
Russian President Vladimir Putin said Turkey’s decision to shoot down a jet near the border with Syria will have “serious consequences” for relations. His U.S. counterpart Barack Obama and the North Atlantic Treaty Organization military alliance called for calm between Turkey and Russia as their war of words threatened to undermine efforts for a united front against Islamic State.
Saudi Cooperation
On Nov. 23, Saudi Arabia said it was ready to “cooperate with all oil producers and exporters, from inside and outside of OPEC, to preserve the stability of the market and prices,” according to a statement. OPEC will meet Dec. 4 to review its output policy.
The Federal Reserve is projected to raise its benchmark from near zero at its Dec. 15-16 meeting, the first gain in almost a decade.
"What happens between now and the end of the year will depend on OPEC and the Fed," Haworth said. "We’re expecting OPEC to do nothing at the next meeting, because any action would just help their competitors. The market has already priced in a Fed rate increase."
WTI oil is poised to average less than $50/bbl for a fourth month, the longest stretch since the global financial crisis. The price rout means large, multinational, integrated energy companies are cheap and good for long-term investors, Russ Koesterich, global chief investment strategist at BlackRock Inc., said in a Bloomberg Television interview.
“They’re cheap, many of them have healthy dividends, and you have the additional benefit that they have downstream refining operations that help balance off the decline in revenue from their exploration and production,” he said.
