Oil Posts Late-Session Gain Despite U.S. Crude Stockpile Buildby
U.S. crude supplies rose by 2.78 million barrels last week
Wildfires in Canada forcing oil companies to cut production
Oil was little changed after swinging between losses after the government reported U.S. crude inventories jumped last week and gains amid concern that oil companies in Canada will be forced to further cut production due to wildfires.
Futures rose in the last few minutes of trading in New York after earlier declining 1 percent to $43.22 a barrel. A report from the Energy Information Administration on Wednesday showed that nationwide crude inventories climbed by 2.78 million barrels to 543.4 million barrels in the week ended April 29 while stockpiles at Cushing, Oklahoma, rose for a second week. Supplies from Canada may be curtailed as companies including Royal Dutch Shell Plc and Suncor Energy Inc. reduced oil-sands production due to wildfires.
The crude inventory build was “much greater than expected,” Phil Streible, senior market strategist at RJO Futures in Chicago, said by telephone. “Regardless if demand picks up at all -- which we’re not really seeing -- and despite any kind of reduction in rigs, it seems like supply levels are continuing to build. That’s going to further put pressure on the market.”
Analysts surveyed by Bloomberg before the EIA report expected an inventory gain of 750,000 barrels, while the American Petroleum Institute was said to report an increase of 1.3 million barrels. Crude stockpiles at Cushing, the delivery point for WTI and the biggest U.S. storage hub, rose 243,000 barrels to 66.3 million. Gasoline inventories climbed by 536,000 barrels.
Prices remain about 60 percent below their peak in mid-2014 as the global oversupply persists. Production from the Organization of Petroleum Exporting Countries has risen, underpinned by gains from Iraq and Iran, according to data compiled by Bloomberg. U.S. crude production dropped by 113,000 barrels a day last week, the largest decline since August, according to the EIA report. U.S. output has steadily fallen to 8.83 million barrels a day as of April 29 from a record 9.61 million last June.
Oil companies including Suncor, Shell and Syncrude Canada Ltd. have curbed output in Canada’s main oil-sands region after wildfires forced tens of thousands of people to flee Fort McMurray in Alberta. Imperial Oil Ltd., Devon Energy Corp. and Cenovus Energy Inc. said the fires aren’t affecting operations.
“I suspect the price would have come off a little bit more had it not been for the growing concern of what the impact of the wildfires is in Alberta,” Randy Ollenberger, an analyst at Bank of Montreal’s BMO Capital Markets unit in Calgary, said by telephone. Traders will be “thinking about how this might impact inventories in PADD 2 over the coming weeks, as we start to see lower production coming out of the oil sands.”
West Texas Intermediate for June delivery rose 13 cents to settle at $43.78 a barrel on the New York Mercantile Exchange. Brent for July settlement declined 35 cents to end the session at $44.62 a barrel on the London-based ICE Futures Europe exchange.
“I don’t think we’re going to see oil breaking higher anytime soon,” Ollenberger said. “We still have a lot of oil in inventory, growing OPEC supply and the declines that the market is waiting for -- that will take some time to start to flow through.”
More oil-market news:
- OPEC is said to head to its June meeting without a plan for a supply cap, according to six delegates from the group.
- Libya’s Agoco oil output dropped to 90,000 barrels a day from 240,000.
- Iranian oil is returning to the market more quickly than expected, the IEA said.
- China’s falling oil output and declining U.S. production may help rebalance a market struggling to recover from the worst price crash in a generation, according to Standard Chartered Plc.