Oil prices slipped on Wednesday after data from the US Energy Information Administration showed a significant increase in US crude stocks, but a third draw down in gasoline inventories helped underpin crude prices.  Anadarko photo.

Oil prices down after US crude stocks rose by 7.1 million barrels last week

Oil prices fell slightly on Wednesday after data released by the US Energy Information Administration showed an significant increase in US crude stockpiles, however, a reduction in gasoline inventories helped underpin crude prices.

By 2:18p.m., EST, benchmark Brent crude futures were up 7 cents to $65.93/barrel and US West Texas Intermediate crude futures slipped 32 cents to $56.24/barrel.

According to the US EIA, US crude stocks climbed by a surprising 7.1 million barrels last week.  Analysts polled prior to the release of the data predicted oil inventories in the United States would increase by 1.2 million barrels.

The EIA reports that US gasoline stocks fell by 4.2 million barrels last week, more than the 2.1 million barrels analysts had predicted, on low refinery rates.  US gasoline futures rose by 1.04 per cent.

“A big rebound in U.S. crude oil imports, combined with a drop in exports led to the large increase in domestic inventories,” David Thompson, executive vice president at Powerhouse, told Reuters. “Demand for refined products remains decent.”

Falling US equity indexes due to stagnating US-China trade talks also soured the mood on crude futures.

“I think there’s a little less optimism in relation to the U.S.-China trade negotiations,” Tony Headrick, energy market analyst at commodity brokerage CHS Hedging LLC told Reuters. “It has sort of gone quiet, so I think equities are continuing to provide an influence here.”

Rising US crude production has also impacted oil prices.  According to the EIA, US crude output hit a record high of 12.1 million barrels per day (b/d) last week.

On Tuesday, Chevron and ExxonMobil released projections on their Permian Basin production which pointed to rising shale oil output for both companies in the largest US oil patch.

According to Reuters, Chevron and Exxon are the dominant players in the Permian and may control one-third of all production in the West Texas and New Mexico field within five years.

The increase in US production is undermining OPEC’s efforts to cut the global crude supply glut.  In January, the cartel along with its former allies, including Russia, began a new crude supply agreement which sees the participants cut their production by a combined total of 1.2 million b/d.

Since the supply cuts began on January 1, oil prices have risen 20 per cent.  OPEC and other pact participants were set to meet in April to determine if the agreement should be extended, but Reuters reports the meeting will likely be pushed back to June.