Oil prices tiptoe higher after EIA-fueled selloff
U.S. crude production has jumped to a two-year high
Oil prices tiptoed higher Thursday, attempting to recoup some of the losses they suffered a day earlier, as traders continued to weigh data showing the biggest weekly fall in U.S. crude supplies in 11 months, but also the highest total domestic production level in more than two years.
Thursday’s move higher is “likely just technical buying interest after breaking below the $47 support level” Wednesday, said Troy Vincent, oil analyst at ClipperData. “Fundamentally speaking, although U.S. crude stocks are set to continue to drop through August, there has been no bullish news since yesterday’s report.”
On the New York Mercantile Exchange, September West Texas Intermediate crude CLU7, +0.36% added 20 cents, or 0.5%, to $46.98 a barrel after spending time swinging between small gains and losses. October Brent crude LCOV7, +0.97% on London’s ICE Futures added 53 cents, or 1%, to $50.80 a barrel.
Oil’s latest moves come after WTI and Brent crude tumbled Wednesday, as investors focused more on the climb in average daily U.S. oil production to its highest since July 2015, instead of the drop in crude inventories, which was the largest weekly fall since September of last year.
The Energy Information Administration reported on Wednesday a rise of 79,000 barrels a day in total crude-oil production to 9.502 million barrels a day last week. The EIA, however, also said that oil inventories fell by 8.9 million barrels, more than double the decline expected by analysts polled by S&P Global Platts.
The Organization of the Petroleum Exporting Countries and the global production-cap agreement has “faded to the back burner, as the resilient trend of U.S. production continues to keep a lid on prices,” said Tyler Richey, co-editor of the Sevens Report.
‘Barring any geopolitical catalysts, $50 [for WTI] will likely remain a stubborn resistance level in the near term.’
“Barring any geopolitical catalysts, $50 [for WTI] will likely remain a stubborn resistance level in the near term, and if production continues to grind higher in the U.S., expect prices to remain under pressure,” he said in its latest report.
OPEC and a group of non-cartel countries led by Russia have agreed to cut oil production through March next year in an effort to rebalance the oil market that has been suffering from a global supply glut in recent years. However, recent data showed OPEC production rose in July because of weaker compliance with the accord, as well as a resurgence in output in Libya and Nigeria—which are exempt from the pact because their oil industries have been disrupted by civil unrest.
There’s also concerns that the OPEC-led cuts are incentivizing other oil producing nations, like the U.S., to ramp up output to gain market share.
Elsewhere in energy trading, prices for natural gas headed higher as traders parsed through the latest EIA report on supplies of the fuel.
The EIA said U.S. supplies of natural gas rose by 53 billion cubic feet for the week ended Aug. 11. The data, however, included revisions to figures for previous weeks tied to a reclassification of natural gas in storage from working gas to base gas. Read the EIA report for details
On average, analysts were looking for a build of 47 billion cubic feet, according to commodity brokerage firm iiTRADER.
September natural gas NGU17, +1.07% traded at $2.911 per million British thermal units, up 2.1 cents, or 0.7%.
–Biman Mukherji contributed to this article