Oil Prices Slide on Surge in Supplies

 

 

 

Oil Prices Slide on Surge in Supplies

U.S. Crude Supplies Unexpectedly Rise, Adding to Glut of Oil

Oil futures retreated Wednesday and auto fuels closed at multiyear lows after data showed an unexpected surge in U.S. crude supplies.

Oil producers added 7.3 million barrels in the week ended Dec. 19, the U.S. Energy Information Administration said Wednesday. The supply surge adds even more to a growing glut of oil that has already sparked an international showdown for market share and a nearly 50% decline in futures since June.

“The market is very fragile and…this is not going to help sentiment in the least,” said Andrew Lebow, a broker at investment bank Jefferies.

Analysts surveyed by The Wall Street Journal had expected a drop of 1.9 million barrels. The unexpected addition comes in contrast to how supplies usually drop at the end of the year when the industry tries to clear stockpiles to help its tax accounting, analysts said. Traders sold on the news.

Light, sweet crude for February delivery settled down $1.28, or 2.2%, to $55.84 a barrel on The New York Mercantile Exchange. The February contract for Brent crude, the global benchmark, recently traded down $1.54, or 2.5%, to $60.24 a barrel on London's ICE Futures exchange.

January reformulated gasoline blendstock, or RBOB, hit its lowest settlement price since April 30, 2009. It lost 5.8 cents, or 3.7%, to close at $1.5127 a gallon. Gasoline stockpiles rose by 4.1 million barrels—10 times more than expected--to 226.1 million barrels, the EIA said in its weekly report.

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January diesel hit its lowest settlement price since July 6, 2010. It lost 6.71 cents, or 3.4%, to close at $1.9236 a gallon. Distillate stocks, which include heating oil and diesel fuel, added 2.3 million barrels—more than double expectations--to 123.8 million barrels.

For some analysts the buildup of products shows that low prices aren’t triggering enough consumer demand to end the glut anytime soon.

“If the U.S. gasoline market can’t pull us higher … then it reinforces the idea that we are still in a petroleum bear market,” said Tim Evans, analyst at Citi Futures Perspective in New York.

But there are some who found hope in the numbers that consumers are starting to buy more.

Refiners moved an additional 572,000 barrels of products like gasoline and jet fuel last week, according to the EIA. That number is more akin to the summer driving season than the start of winter, said Carl Larry, director of oil and gas for Frost & Sullivan.

“That’s a crazy number,” Larry said. “You’re really seeing these low prices drive the consumer (to) increase the demand.”

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