Record US output takes its toll on oil prices

London — Oil prices fell on Thursday after official data showed an unexpected rise in US crude stockpiles, US output hit a record high and major oil exporters increased production.

International crude oil benchmark Brent was down 40c at $72.50 a barrel by 7.40am GMT. US light crude was 20c lower at $68.56.

Brent has fallen almost 9% from last week’s high above $79 on emerging evidence of higher production from Saudi Arabia and other members of oil cartel Opec as well as Russia and the US.

“The outlook remains negative,” said Robin Bieber, technical analyst at London brokerage PVM Oil Associates.

The US Energy Information Administration (EIA) said on Wednesday that US crude production had reached 11-million barrels a day for the first time. The country has added nearly 1-million barrels a day in production since November, thanks to rapid increases in shale drilling.

Even higher US production was likely, Rystad Energy said.

“We are still bullish on US shale, though we expect to see a temporary plateau in 2019 due to the bottlenecks of pipelines and, indeed, manpower and drivers,” said Yosuke Uehara, vice-president at Rystad Energy.

A sharp jump in US crude oil inventories also added to the bearish tone in the market.

US crude stocks rose by 5.8-million barrels last week, compared with a forecast of a decline of 3.6-million barrels.

US petrol inventories dropped by 3.2-million barrels last week, while distillate stockpiles, which include diesel and heating oil, declined by 371,000 barrels, the Energy Information Administration said.

A Reuters poll taken before the data release had forecast petrol stocks would be unchanged and distillate stockpiles would show a build of about 900,000 barrels.

Meanwhile, Opec and non-Opec producers cut oil output in June by 20% more than agreed levels, compared with 47% in May, two sources familiar with the matter told Reuters on Wednesday.

Saudi Arabia boosted production sharply in June, raising crude shipments to world markets by 390,000 barrels a day to 7.6-million barrels a day, Kpler tanker-tracking data showed. That was the biggest increase since the end of 2016, according to the International Energy Agency.

A Reuters survey of Opec production showed Saudi output at a near-record, up 700,000 barrels a day at 10.70-million barrels a day.

Reuters