Oil prices fell in trading on Thursday after data from the US Energy Information Administration showed US crude stocks had risen by 1.3 million barrels last week. Analysts had predicted a 3.5 million barrel drop. Equinor photo.
Oil prices settle on rising US commercial crude inventory
On Thursday, oil prices settled down on data from the US Energy Information Administration which showed a surprise increase of 1.3 million barrels of US crude stockpiles last week. A poll of analysts prior to the release of the data predicted a drop of crude stocks by 3.5 million barrels.
At the end of the session, Brent crude futures dropped 85 cents to settle at $77.39/barrel and US crude futures fell $1.20 to end the day at $72.94/barrel. On Tuesday, US crude futures hit a 3-1/2 hear high of over $75/barrel.
“An unexpected build in the US commercial crude inventory has prompted profit-taking,” Abhishek Kumar, senior energy analyst at Interfax Energy told Reuters.
There was a decline to the lowest oil inventory level since December 2014 at Cushing, Oklahoma, the delivery point for US crude futures.
A production outage at the 360,000 barrels per day (b/d) Syncrude plant in the Alberta oil sands cut the flows to Cushing. Syncrude is expected to be shuttered through July, which will likely keep cutting into Cushing inventories.
“The most concerning aspect for inventories is the continued decline in Cushing,” Andrew Lipow, president of Lipow Oil Associates told Reuters.
Late Wednesday afternoon, US President Donald Trump tweeted out an accusation that OPEC is driving up gas prices.
“The OPEC Monopoly must remember that gas prices are up & they are doing little to help,” Trump tweeted. “If anything, they are driving prices higher as the United States defends many of their members for very little $’s.”
“This must be a two way street,” he continued, adding “REDUCE PRICING NOW!”
In June, OPEC along with Russia agreed to increase their production to help compensate for production losses in Venezuela and Iran.
On Thursday, Saudi Arabia cut August prices of its Arab Light grade crude exports. Stewart Glickman, energy equity analyst at CFRA Research says the move seemed to be related to Trump’s tweets chastising OPEC.
The Trump administration’s decision to opt out of the Iran sanction relief deal and re-impose sanctions on Iranian exports has increased oil prices, according to analysts.
In response to the impending sanctions, Reuters reports an Iranian Revolutionary Guards commander said Tehran may block crude shipments through the Strait of Hormuz.
“Roughly 30 per cent of all seaborne oil is transported through this strait every day,” Reuters reports Commerzbank said in a note. The banking and financial services company added that such a blockade would have “dramatic consequences for global oil supply and an impact on prices that is almost impossible to put into figures.”
A spokesman for the US military’s Central Command said the US Navy stands ready to ensure freedom of navigation and free flow of commerce.