Oil futures fall despite drop in U.S. supplies
Oil futures fell Wednesday to their lowest level in six weeks after a mixed government inventory report failed to offset a belief that supplies were growing faster than demand.
Investors shrugged off OPEC’s decision to keep production levels steady, a possible sign that prices had peaked for the year, analysts said.
In its weekly inventory report, the Energy Department’s Energy Information Administration said crude supplies plunged by 8 million barrels last week, much more than the expected 700,000-barrel decline. That caused oil prices to jump briefly above $90 a barrel, but other aspects of the report weighed on prices as the day wore on.
Crude supplies grew at Cushing, Okla., the closely watched delivery terminal for New York Mercantile Exchange contracts. Inventories of heating oil rose when analysts had expected a decline, and gasoline supplies rose more than expected.
“Overall, this is a mixed report,” wrote Tim Evans, an analyst at Citigroup Inc., in a research note.
Earlier Wednesday, Organization of the Petroleum Exporting Countries ministers meeting in Abu Dhabi, United Arab Emirates, said the cartel would leave output unchanged “for the time being” because the world was “well-supplied” and crude reserves were at comfortable levels.
That also caused a brief price spike. But there are signs that OPEC nations are already producing more than their quotas, and some analysts expect OPEC output to increase even further in the weeks to come.
Light, sweet crude for January delivery fell 83 cents to settle at $87.49 a barrel, oil’s lowest close since Oct. 24. January gasoline fell 3.47 cents to $2.217 a gallon, and January heating oil fell 2.25 cents to $2.489 a gallon. January natural gas rose 3 cents to $7.185 per 1,000 cubic feet.
Some of the decline in crude supplies can be explained by oil imports, which fell last week by an average 980,000 barrels a day to 9.4 million barrels a day. Gasoline imports rose last week by 334,000 barrels a day to an average of 1.2 million barrels a day.
Oil prices have dropped about $10 from all-time highs near $100 in a little over a week on evidence of rising inventories at Cushing, speculation that OPEC would boost supplies and indications that some OPEC countries are already producing more oil than their quotas.
OPEC output could jump by 300,000 to 400,000 barrels a day more once oil fields in the United Arab Emirates return to service after seasonal maintenance, wrote Costanza Jacazio, an analyst with Barclay’s Capital, in a research note. Last month, Saudi Arabia’s oil minister said the kingdom was producing 9 million barrels a day, more than its quota.
Analysts say a price drop on a day with bullish oil headlines could indicate that the market has begun a seasonal decline.
“How the market finishes today could tell us what prices really want to do,” wrote Peter Beutel, president of the energy risk management firm Cameron Hanover, in a research note.
