Oil slides as market eyes crude production, approaching Harvey
NEW YORK (Bloomberg) -- Oil slipped as rising U.S. crude production placed a bearish lens over the state of the U.S. market, even though recent government data showed a decrease in inventories.
Futures fell 1.4% in New York amid light volume following Wednesday’s rally. The latest government data showed production at the highest level since July 2015, even as crude stockpiles turned lower for an eighth straight week, according to Energy Information Administration data. Meanwhile, tropical storm Harvey is expected to strengthen and become the first hurricane to strike Texas since 2008, sending gasoline crack spreads higher.
“It was a very good inventory report,” yet “people are worried somewhat about rising shale production,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass., said by telephone. Gasoline crack spreads are climbing on the assumption “that you’ll have enough loss of refinery output with a day or two shutdown.”
Futures have dropped 4.8% this month in New York as investors focus on rising output from producers such as the U.S. and Libya as the Organization of Petroleum Exporting Countries and its allies work to reduce output. OPEC’s Joint Ministerial Monitoring Committee, which oversees implementation of the cuts, plans to invite Nigeria and Libya to gatherings in Vienna next month, according to the OPEC secretariat.
West Texas Intermediate for October delivery declined 66 cents to $47.75/bbl at 10:03 a.m. on the New York Mercantile Exchange. Total volume traded was about 8% below the 100-day average. Prices gained 58 cents, or 1.2%, to $48.41 on Wednesday.
Brent for October settlement fell 45 cents to $52.12/bbl on the London-based ICE Futures Europe exchange. Prices climbed 70 cents to $52.57 on Wednesday. The global benchmark crude traded at a premium of $4.37 to WTI.
U.S. crude inventories slipped by 3.33 MMbbl last week, while gasoline stockpiles dropped by 1.22 MMbbl, the EIA reported Wednesday. Crude output increased by 26,000 bpd to 9.53 million, expanding for a second straight week.
“The most recent EIA stock update gave something for both bulls and bears to cheer about,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “As has become the norm, the fly in the ointment for bulls is the march higher in U.S. crude production.”
Harvey has already forced workers off some platforms. Royal Dutch Shell Plc shut production at its Perdido platform in the Gulf of Mexico and evacuated the facility, while Anadarko Petroleum Corp. shut in production and also evacuated personnel at several oil and gas production platforms.
The gasoline crack spread, a rough measure of the profit from refining crude into gasoline, climbed as much as 8.4% to $17.09/bbl.
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