Crude falls to near $56 after U.S. gasoline stockpiles gain

By Ben Sharples and Grant Smith on 12/7/2017

HONG KONG AND LONDON (Bloomberg) -- Oil held losses near $56/bbl after falling the most in two months as U.S. gasoline stockpiles expanded more than expected, offsetting a third weekly decline in crude inventories.

Futures were little changed in New York after tumbling 2.9% Wednesday, the biggest daily drop since Oct. 6. Motor-fuel stockpiles rose by 6.78 MMbbl last week for a fourth weekly advance, according to EIA data. That’s more than double the most bearish estimate in a Bloomberg survey. U.S. oil output increased to a record.

“The decline in crude-oil inventories was offset by an even larger increase in product inventories,” said Norbert Ruecker, head of commodity research at Julius Baer Group in Zurich. “We stick to our cautious view and see more price downside than upside.”

Oil has advanced about 18% since the start of September and is heading for a second yearly gain as OPEC and its allies extend supply cuts, yet prices have slipped from a two-year high last month. A sustained run above $60/bbl would be needed for a fresh surge in U.S. output, JPMorgan Chase said in a note after talks with shale operators in the Permian basin.

WTI for January delivery was at $56.12/bbl on the New York Mercantile Exchange, up $0.16. Total volume traded was about 10% below the 100-day average. Prices slid $1.66 to $55.96 on Wednesday.

Brent for February settlement advanced $0.33 to $61.55/bbl on the London-based ICE Futures Europe exchange, after falling 2.6% on Wednesday. The global benchmark traded at a premium of $5.34 to February WTI.

U.S. crude inventories fell by 5.61 MMbbl last week, the EIA reported Wednesday. Oil production expanded for a seventh week to 9.7 MMbpd, the highest level in weekly data compiled by the EIA since 1983.

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Exxon Mobil is joining Chevron and other U.S. refiners to supply the newly free Mexican fuel market, sending two cargoes totaling 120,000 bbl of diesel and gasoline on Wednesday from its refinery in Beaumont, Texas, to a private terminal in San Luis Potosi.

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