Oil dropped to a three-month low in New York, after government data showed that US crude stockpiles unexpectedly climbed last week, halting the longest streak of declines on record.
Futures fell as much as 2.8 percent in New York, after crude inventories rose 1.67 million barrels, according to an Energy Information Administration report. Analysts surveyed by Bloomberg had forecast a 2-million-barrel decline. Refineries reduced operating rates, which had been at the highest level of the year. US refiners usually don’t begin to curb processing until August, as the summer driving season nears its end.
“You should expect further inventory gains, as refinery runs decline,” said Rob Haworth, a senior investment strategist in Seattle at US Bank Wealth Management, which oversees $133 billion of assets. “We all thought the market would rebalance more quickly. It won’t be until 2017 before the crude oversupply is gone.”
Oil has slipped more than 15 percent since early June after almost doubling from a 12-year low in February. While the global oversupply has eased amid supply disruptions from Nigeria to Canada, high inventories of both crude and refined fuels coupled with signs of faltering demand growth have stifled the recovery.
Rising stockpiles
West texas Intermediate (WTI) oil for September delivery dropped $1.11, or 2.6 percent, to $41.81 a barrel at 1:17 p.m. on the New York Mercantile Exchange. Prices touched $41.73 earlier, the lowest since April 20. Total volume traded was down 13 percent from the 100-day average.
Brent for September settlement fell $1.38, or 3.1 percent, to $43.49 a barrel on the London-based ICE Futures Europe exchange. Futures reached $43.40, the lowest since May 10. The global benchmark traded at a $1.68 premium to WTI.
US crude inventories climbed to 521.1 million barrels in the week ended on July 22, leaving supplies at the highest seasonal level in decades, EIA data show. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest US oil-storage hub, increased by 1.11 million barrels to 65.2 million, the EIA data show.
Crude production in the US rose by 21,000 barrels a day to 8.52 million last week, marking the longest series of gains since January. US oil explorers have boosted the number of active rigs by 55 since the start of June to 371, with 14 added last week, Baker Hughes Inc. said on July 22.
Refinery activity
Refineries bolstered operating rates by 0.8 percentage point to 92.4 percent of capacity. Gasoline supplies rose 452,000 barrels to 241.5 million, the highest since April, the report showed. Stockpiles of distillate fuel, a category that includes diesel and heating oil, slipped 780,000 barrels to 152 million.
“The crude number was a big surprise,” said Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments. “This was a very negative report. The only positive headline was the distillate number.”
Oil-market news
Iraq is negotiating with Exxon Mobil Corp. and Petrochina Co. to develop two oil fields in the south of the country. as it seeks to maintain overall production at about 4.8 million barrels a day for the rest of 2016, Deputy Oil Minister Fayyad Al-Nima said. Brazil’s interim government is studying the benefits of scrapping nationalistic oil legislation that was championed by now suspended President Dilma Rousseff and her leftist Workers’ Party.