Oil stocks rise, surprising analysts and causing price to slip

04 August, 2018, 18:25 | Author: Brooke Harris
  • Michael Gruber  Getty Images Olivier Douliery-Pool  Getty Images Samantha Lee  Business Insider

Oil prices rose, with United States crude futures jumping more than 2%.

On Tuesday, the EIA reported that USA crude production fell 30,000 barrels per day to 10.44 million bpd in May.

Oil traders said prices pulled back after information supplier, Genscape reported that inventories at Cushing, Oklahoma, the delivery hub for U.S. crude, rose almost 200,000 barrels, or nearly one per cent, from Tuesday to Friday last week.

Iran has renewed threats to block the Strait of Hormuz since the United States announced its plan to reinstate sanctions and cut shipments from Opec's third-largest producer to zero from about 2.5 million barrels a day now.

In the Reuters survey at the end of last month, analysts had expected WTI to average $66.79 per barrel this year, up from the $66.47 forecast in May, as they expected supply deficits from Venezuela and Iran to outweigh OPEC's production boost.

On Monday, WTI prices reached 69.31 dollars a barrel on the New York Mercantile Exchange but it took a steep dive due to those concerns and settled at 67.89 dollars.

Analysts polled by IG Group had expected a slight inventory decline of 200,000 barrels, after the previous week's major, 6.1-million-barrel draw reported by the EIA.

Brent crude, the global benchmark, was down 1.3% to $73.22 a barrel on London's Intercontinental Exchange.

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Brent lost more than 6 percent in July, while USA crude futures slumped about 7 percent, the biggest monthly decline for both benchmarks since July 2016.

Gasoline stocks USOILG=ECI declined 2.5 million barrels, while crude stocks at the Cushing, Oklahoma, delivery hub for USA crude futures USOICC=ECI fell by 1.3 million barrels, EIA data showed.

Geopolitical tensions have roiled the crude market, sending Brent prices higher since mid-July as global supplies tighten. September WTI fell 92 cents, or 1.32%, to settle at $$68.69 a barrel, for a weekly gain of 0.6%. Saudi production increased but was offset by a decline in Iranian supply due to the restart of USA sanctions, the survey found.

In other news, Yemen's Houthi group said that it would suspend attacks in the Red Sea in order to support peace efforts.

The Organization of the Petroleum Exporting Countries, plus Russian Federation and other allies, decided in June to ease supply cuts that had been in place since 2017. Saudi Arabia suspended oil shipments through the strait last week after the Houthis attacked two Saudi oil tankers. "Even though trade war worries were eased between the US and European Union this week, they still loom large with China, weighing on prices".

Concern over slowing economic growth because of a trade dispute between the U.S. and China are also putting downward pressure on the market.

Oil retreated in NY, heading for its biggest monthly loss since March 2017, as some of the supply risks facing the market abated.

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