A surprise jump in crude stockpiles in the United States sent the price of oil down by more than 4 per cent yesterday amid fears that diplomatic tension in the Middle East could hamper Opec’s agreement to cut production.
US oil futures fell to $46.12 a barrel, the lowest level in nearly a month, after the US Energy Information Administration (EIA) reported that crude inventories had grown by 3.3 million barrels to 513.2 million barrels last week.
An unofficial estimate on Tuesday suggested that inventories would fall by 3.5 million barrels to mark a ninth consecutive week of drawdowns. Oil refineries cut production from record levels amid reduced demand last week, the EIA said, adding to downward pressure on the oil price.
David Madden, an analyst at CMC Markets, said: “The oil market has been in decline since the Opec announcement last month, and now that US stockpiles are rising, we may see a continuation of the decline.”
Analysts suggested that moves this week by Saudi Arabia, the United Arab Emirates and other Gulf countries to cut diplomatic and transport ties with Qatar could weigh on the agreement by the Opec states to trim oil output.
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Under the deal, which was extended at the end of March, Opec nations have pledged to reduce oil production by nearly 1.8 million barrels a day to support the oil price. Qatar, an Opec member that pumps comparatively little oil, has agreed to cut its production by 30,000 bpd.
Meanwhile, American oil producers have been bringing rigs online at a record pace. Last week, 11 oilrigs were added to the US tally, bringing the total to 733, the most since April 2015, according to figures from Baker Hughes, the oilfield services company. It marked a record 20th week in a row that the oilrig count had climbed.
In a report this week, the EIA estimated that US oil production could hit a record ten million barrels per day in 2018, driven by increased production from shale fields, especially in Texas. This would help to push the average oil price down to $56 a barrel next year, which was $1 lower than its previous estimate, the EIA said.
The agency’s inventories report yesterday showed that refinery crude runs fell by 283,000 bpd last week to 17.2 million bpd from a record 17.5 million bpd the week before. Production capacity at refineries fell by 0.9 percentage points to 94.1 per cent.
Crude imports rose to 8.3 million bpd last week, a gain of 356,000 on the week before. Imports over the past four weeks averaged 8.3 million bpd, which is 8.8 per cent higher than during the same period a year ago. Exports fell to 557,000 bpd from a record 1.3 million bpd the week before.
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Petrol stockpiles rose by 3.3 million barrels compared with an expected gain of 580,000 barrels. Petrol, or gasoline, futures fell by about 4 per cent after the figure was released.
In New York last Brent crude was 3.9 per cent lower at $48.19 a barrel.
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