Oil Tumbles to Lowest Since November as Gasoline Supplies Surge
Oil slipped to the lowest since November as weaker demand at the start of the summer driving season led to another increase in gasoline stockpiles.
Futures closed 3.7% down in New York. Gasoline inventories rose 2.1 million barrels last week, and diesel supplies also increased, according to the Energy Information Administration. Crude inventories fell by 1.66 million barrels, less than the 2.45 million barrels that analysts surveyed by Bloomberg News had expected.
Adding to the market pessimism, the International Energy Agency said new production from OPEC’s rivals will be more than enough to meet growth in demand next year, overwhelming the oil group’s efforts to reduce supplies.
"A gasoline inventory build is the last thing the bulls need," John Kilduff, a partner at Again Capital, a New York-based hedge fund, said by telephone. "It’s really counter to what we should be seeing this time of year."
Oil has extended its slump below $50 a barrel as concerns grow that rising U.S. supplies will offset the production curbs by the Organization of Petroleum Exporting Countries and allies including Russia. Output at major American shale fields will reach a record in July, according to EIA. OPEC should have agreed to cut an additional 1 million barrels a day for 90 days when the group met last month to bring the market back into balance, Gary Ross, founder of PIRA Energy, a unit of S&P Global Platts, said in London.
West Texas Intermediate for July delivery slid $1.73 to settle at $44.73 a barrel on the New York Mercantile Exchange, the lowest close since Nov. 14. Total volume traded was about 71% above the 100-day average.
Brent for August settlement fell $1.72 to end the session at $47 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $2.07 to August WTI.
Front-month gasoline futures declined 4.5% to settle at $1.4327 a gallon, the lowest since late November.
Gasoline inventories climbed to 242.4 million barrels last week, the highest level since mid-March, while demand fell to the lowest since April, according to the EIA report. Distillate supplies surged to 151.4 million barrels and refinery utilization rose to 94.4%, the data showed.
“We’ve been running at historically high levels on the refinery side, which is pushing out more product. The gasoline build was negative as well and that’s one of the things the market has been watching,” Nick Holmes, director at Tortoise Capital Advisors in Leawood Kansas, which manages $16 billion in energy-related assets, said by telephone. “Obviously again, disappointing crude draw today relative to the market consensus.”
The United States, Brazil, Canada and other producers outside OPEC will increase output next year by the most in four years, IEA said in its first forecast for 2018. As a result, the need for crude from OPEC won’t be high enough for the group to reverse cuts that it’s currently making to drain a global glut.
Oil-market news:
• Iraq is driving up crude oil exports to the United States, the world’s second-biggest import market, just as there are signs Saudi Arabia is honoring a pledge to restrict such deliveries, according to tanker-tracking data.
• China’s crude output in May fell 1.8% from the previous month to average 3.84 million barrels a day, the lowest since October, according to Bloomberg calculations based on data June 14 from the National Bureau of Statistics.
