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Oil slips despite larger draw in US stocks
[NEW YORK] Oil prices rebounded from earlier losses, but ended lower on the day, after the Energy Department reported a larger-than-expected decline in US inventories and a falloff in weekly production on Thursday.
The market was pressured by a bearish outlook by the International Energy Agency, which lowered its forecast for oil demand for 2018.
Oil has strengthened in recent weeks, but it is unclear whether US crude prices will regain the high of nearly US$53 a barrel reached in late September. A surprise build in gasoline inventories fed concern that crude stocks may begin to rise again, sapping some strength from the recent rally.
Brent crude oil settled down 69 cents, or 1.2 per cent, to US$56.25 a barrel while US light crude ended down 70 cents, or 1.4 per cent, to US$50.60 a barrel. Both benchmarks have risen more than 20 per cent from their lows in June as world oil markets tightened.
Crude inventories fell by 2.7 million barrels in the week to Oct 6, compared with analysts' expectations for a decrease of 2 million barrels. Distillate stocks fell by 1.5 million barrels, but petrol inventories surprisingly rose by 2.5 million barrels.
"With the US already out of the summer driving season, there will be less demand for gasoline over the coming weeks - this could result in weeks of crude builds as oil production in the US remains high," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
The IEA said demand for Opec oil would be 32.5 million barrels per day next year - around 150,000 bpd lower than the group pumped last month.
Gary Ross, founder of PIRA Energy and head of Global Oil Analytics for S&P Global Platts, said the global crude surplus has now largely been absorbed - and there was risk that Opec could overshoot on its cuts.
"We think (Brent) should make a new high before the end of the year," Ross said, speaking to reporters as the annual PIRA client seminar in New York. He said he expects crude to stay between US$50 and US$60 a barrel through the end of the year.
US crude inventories are still 13 per cent above five-year averages headed into the busy winter season, despite efforts by Opec to cut production.
The Opec-led deal helped lift oil from below US$30 a barrel early last year. But traders say supplies remain ample and opec is widely expected to extend its cuts beyond the current expiry date of end-March 2018.
"There is little doubt that leading producers have re-committed to do whatever it takes to underpin the market,"the IEA said.
High US production is pushing increasing volumes of US crude into world markets, feeding inventories and undermining Opec's efforts to tighten the market. US exports fell in the most recent week to 1.27 million bpd, but US exports have still exceeded 1 million barrels a day for three straight weeks, the first time this has happened.
Traders have expressed concerns that the United States will at some point reach its export capacity, though that has not been hit yet.