Oil slips as U.S. crude inventories show signs of increasing

Storage sphere tanks, center, for liquefied natural gas (LNG) sit near oil storage tanks, below, in the Jordan Oil Terminal, at Aqaba port, operated by Aqaba Development Corp., in Aqaba, Jordan. Photographer: Annie Sakkab/Bloomberg

INTERNATIONAL – Oil fell, compounding a monthly decline, after U.S. crude inventories were said to rise by more than expected.
Futures in New York fell 1.8 percent, set for the first monthly drop since February. The U.S. benchmark traded at a discount of more than $11 to Brent crude for the first time since March 2015. On Wednesday, the American Petroleum Institute was said to report a 1 million barrel increase in crude stockpiles, double the gain forecast in a Bloomberg survey of analysts.
Oil had surged earlier this month — with benchmark Brent climbing above $80 a barrel — driven by Donald Trump’s decision to renew American sanctions on OPEC member Iran and as Venezuelan output plunged amid an economic crisis. Prices have dropped about 5 percent since Saudi Arabia and Russia last week proposed to phase out supply curbs by OPEC and its allies, a decline compounded by fears over U.S.-China trade frictions and European political turmoil.
“You had the API showing a strong build in crude oil and nothing fantastic on the products,” says Olivier Jakob, managing director of consultant Petromatrix GmbH. “Going back above $80 is going to be difficult.”
West Texas Intermediate for July delivery traded at $66.99 a barrel on the New York Mercantile Exchange, down $1.58, at 9:16 a.m. in New York. The contract is poised for a 2.3 percent drop this month after an 11 percent rally in the previous two months.
Brent futures for July settlement, which expire Thursday, rose 0.7 percent to $78 a barrel on the London-based ICE Futures Europe exchange. The more active August contract rose 0.3 percent.
The Organization of Petroleum Exporting Countries and its partners were said to conclude that the market re-balanced in April, with the global surplus shrinking to less than the five-year average. As the oversupply was cleared, there was concern that the loss of barrels from Iran and Venezuela in the global oil market could cause a supply shortage, and that higher prices may hurt consumption. Saudi Arabia and Russia moved to ease those fears last week.
imagePumpjacks operate on oil wells in the Permian Basin in this aerial photograph taken over Crane, Texas, U.S., on Friday, March 2, 2018. Photographer: Daniel Acker/Bloomberg
Also holding the attention of traders this month has been the widening spread between Brent and WTI prices. The global benchmark traded at a $11.30 premium to WTI for July, with the more active August spread at a $10.61 premium. Surging output and a lack of pipeline capacity in the prolific Permian Basin shale play in Texas is exacerbating swelling U.S. inventories.

Source: iol.co.za