Investing.com – Weekly drawdowns in U.S. crude stockpiles are losing out against the narrative of a faster-than-expected build in pipeline capacity in America that’s bringing more supply into a world already brimming with oil.
Oil prices initially rose on Wednesday after the U.S. Energy Information Administration reported a modest stockpile decline for last week. But by the close, both U.S. West Texas Intermediate crude and global benchmark Brent were in negative territory.
U.S. crude settled down 50 cents, or 1%, at $52.15 per barrel. It rallied 2.3% at the session highs and stayed up initially after the EIA reported a of 1.2 million barrels last week versus analysts’ forecasts for a drop of almost 3 million.
, the U.K.-traded global benchmark for crude, was down 10 cents, or 0.2%, at $60.10 per barrel by 3:11 PM ET (20:11 GMT).
While there wasn’t a single clear reason to cite for the market’s reversal, prices fell back after a Reuters report of a sooner-than-expected startup of the extended Sunrise oil pipeline system in West Texas that shifted flows of crude and boosted inventories in Cushing, Okla close to a one-year high.
Crude stockpiles at the Cushing, Okla. storage hub for U.S. crude hit 38.2 million barrels last week, the highest since January, the EIA said.
Pipeline capacity has so far been the only downside to U.S. crude production, which is already at record highs at 11.7 million barrels per day (bpd) this year, making the country the world’s largest oil producer. The United States also turned net oil exporter this month, the first time in 75 years.
Full pipelines have kept crude trapped in west Texas, but the startup of Plains All American’s extended Sunrise pipeline in November has helped send more crude from the Permian basin into Cushing, the delivery point for U.S. crude futures.
When the Saudi-dominated OPEC and its Russian-led allies announced last week a deal to cut their combined supplies by 1.2 million bpd over the next six months to clear a global oil glut and pull prices higher, the world’s attention was instead on the United States, which was not a party to the cuts.
The EIA said in a separate outlook on Tuesday that it expected U.S. output to average 10.9 million bpd this year and 12.1 million in 2019, essentially covering all of the 1.2 million that OPEC and its allies intended to cut. But in what appeared to be a move to hedge itself, the agency also said it expected the cuts planned by the enlarged OPEC+ to help balance global supply and demand next year.
Analysts said on Wednesday that year-end window-dressing was also keeping a lid on any crude rally, with bullish money managers hit hard by the selloff reluctant to buy more as 2018 winds to a close.
“Overall price action remains poor and we need to see a few decent closes as well,” said Scott Shelton, broker and analyst for ICAP (LON:) in Durham, N.C.
In addition, OPEC is suggesting that the road to rebound for crude prices may be more challenging than thought as it lowered demand expectations for its 2019 supply by another 100,000 barrels per day.
With just three weeks to the end of 2018, WTI remains down about 15% on the year and some 32% lower from four-year highs of nearly $77 per barrel hit in early October. Brent is down about 10% on the year and some 31% lower from four-year highs of nearly $87 per barrel hit two months ago.
The EIA said rose by 2.1 million barrels last week, compared to analysts’ expectations for a build of almost 2.5 million. , which include diesel fuel, unexpectedly decreased by nearly 1.5 million barrels, compared to forecasts for a gain of 1.8 million.
Source: Investing.com
