On Thursday, oil prices stabilized following U.S. data displayed a huge drop in crude stockpiles but also an advance in production, taking U.S. crude output to its highest in over two years. Brent crude remained the same at $50.27 a barrel. U.S. light crude CLc1 dropped 5 cents at $46.73. Both benchmarks dropped more than 1 percent on Wednesday.
Energy Information Administration (EIA) data reported commercial U.S. crude stocks C-STK-T-EIA have dropped by almost 13 percent from their highs in March to 466.5 million barrels. Stocks are now lower than last year. But U.S. oil output is increasing quickly as shale producers take advantage of a recent hike in prices.
U.S. production hiked by 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.75 percent above the most recent low in mid-2016. C-OUT-T-EIA “The EIA data suggest the U.S. oil market is becoming more balanced, with crude inventories falling,” stated Tamas Varga, senior market analyst at London brokerage PVM Oil Associates.
“But the big jump in production was the focus.”
Advancing U.S. output has been deflation efforts by the Organization of the Petroleum Exporting Countries and non-OPEC producers including Russia to cut a global fuel glut. They have committed to trim output by a total of 1.8 million bpd between January this year and March 2018. William O’Loughlin at Rivkin Securities said that if inventory reduction continued at the current rate, U.S. stocks would drop below the five-year average in two months.
“The pace of the declines indicates that OPEC production cuts are having an effect, although the current oil price suggests that the market is sceptical about the longer-term prospects for rebalancing of the oil market,” he continued.
Brent prices declined almost 12 percent since OPEC and its allies began trimming production in January.
“Gasoline consumption growth in China is set to see a marked slowdown over the coming years, due to macroeconomic headwinds, improving fuel economy and competition from alternative fuels,” BMI Research quoted.
THE MORNING REPORT
Start your workday the right way with the news that matters most.