Oil prices fell on Thursday as investors grew more concerned about bulging global oil supplies which are increasing faster than experts had forecast.  Anadarko photo.

Oil prices down over 1 per cent

Oil prices dropped over 1 per cent on Thursday as investors grew more concerned about rising global crude stockpiles that are increasing faster than anticipated.

By 2:58 p.m., EST, Brent crude futures fell $1.47 to $70.60/barrel and US West Texas Intermediate crude futures dropped $1.08 to $60.59/barrel.

According to Reuters, the market is now focussed on record US oil output and signals from other producers, including Iraq, Abu Dhabi and Indonesia that their production will climb more quickly than expected in 2019.

Fears of growing global supplies dampened an early session rally based on rising Chinese crude imports.

“There’s a trifecta of trouble created by U.S. stockpile builds, OPEC overproduction and the watering down of Iran sanctions,” Bob Yawger, director of futures at Mizuho told Reuters.

Oil prices fell despite data from Chinese customs that showed China’s crude imports hit a record high 9.61 million barrels per day in October.  This is 32 per cent higher than October, 2017.

China, along with seven other countries, has been granted a waiver from the United States to continue to import oil from Iran without penalty.  The Trump administration is allowing China to purchase 360,000 b/d for 180 days, according to two Reuters’ sources.

India, South Korea, Japan, Italy, Greece, Taiwan and Turkey were also granted waivers last week.

US production rose to a new record high last week.  At 11.6 million b/d, the United States overtook Russia as the world’s largest oil producer.  Yawger said the increase in production was a big jump, “not just a tick”.

The US Energy Information Administration forecasts US production to top 12 million b/d by the middle of 2019.  The increase is mostly due to the booming shale industry.

With the Iran crude waivers in place and rising US production, investors and analysts believe there is more than enough crude supply to meet demand.

However, a number of market watchers say they expect OPEC and its allies, including Russia, to take steps to cut the supply of crude.

“OPEC and Russia may use (production) cuts to support $70 per barrel,” Ole Hansen, head of commodity strategy at Saxo Bank told Reuters.