Crude Oil Price Falls Amid Ample US Supply, Output Gain
The price of oil fell in New York on May 27 on ample U.S. crude stockpiles as output surged to a record.
Inventories remain near the highest level since 1930 and 100 million barrels above the five-year average for this time of year.
Oil’s recovery from a six-year low faltered this month amid speculation that a supply glut will persist. Investors are pulling money out of energy producers for the first time in eight months, taking short-term gains after oil rebounded.
“We still have an awful lot of crude,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group, said by phone. “We could continue to see big draws and still have these ridiculous inventories.”
West Texas Intermediate for July delivery fell 38 cents, or 0.7%, to $57.13 a barrel May 27 on the New York Mercantile Exchange. Prices earlier touched $56.51, the least since April 28.
Brent for July settlement rose 10 cents to $62.16 a barrel on the London-based ICE Futures Europe exchange. It earlier slipped to $61.24, the lowest intraday level since April 15. The European benchmark crude traded at a $5.07 premium to WTI.
All but one of 34 analysts and traders surveyed by Bloomberg News predicted the Organization of Petroleum Exporting Countries will leave its production targets unchanged at its June 5 meeting in Vienna.
U.S. crude production rose by 304,000 barrels a day to 9.57 million, the most since the Energy Information Administration began gathering weekly data in 1983.
“I’m paying the most attention to the production part of the report,” Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital in Miami, said by phone. “That’s a phenomenal production number and a sign of what’s to come.”
Crude inventories dropped 2.8 million barrels to 479.4 million last week. A 2 million-barrel supply decline was projected by analysts in a Bloomberg survey. Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI traded in New York, fell 433,000 barrels to 60 million.
“We’ll certainly see crude draws continue for the next several weeks,” Matt Sallee, who helps manage $17.7 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas, said by phone.
Refineries operated at 93.6% of their capacity, up from 92.4% the previous week and the most since Jan. 2.
Gasoline stockpiles dropped 3.31 million barrels to 220.6 million, the lowest since Dec. 5. Demand for the motor fuel averaged over four weeks climbed 203,000 barrels a day to 9.25 million, the most since January.
“The big drop in gasoline inventories and the big gain in demand were the most striking numbers,” John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy, said by phone. “Any recovery will be short-lived as attention will soon shift back to the upcoming OPEC meeting and the global supply glut.”
Gasoline futures for June delivery increased 2.01 cents, or 1%, to $1.964 a gallon in New York. June ultra-low-sulfur diesel rose 0.03 cent to $1.8569 a gallon.
The average price for gasoline at the pump was unchanged at $2.739 a gallon May 27, down from $3.65 a year earlier, according to the Heathrow, Florida-based AAA, the nation’s biggest motoring group.
“Lower pump prices will increase the miles driven when people take vacations this year,” Sallee said.
More than $1.55 billion has been withdrawn this month from exchange-traded funds concentrated on energy stocks such as Exxon Mobil Corp. and Chevron Corp. It’s on pace for the first monthly setback for the group since investors began pouring into the sector in October with an eye toward profiting from an eventual recovery in prices.
