NEW YORK: Oil prices fell yesterday as US government data showed crude inventories rose last week and as a stronger dollar and weaker global equities applied pressure.
US crude oil stocks rose 2.5 million barrels, the Energy Information Administration (EIA) said in its weekly report, contrasting with expectations inventories would be down 2.3 million barrels.
“The crude oil inventory rise was driven by a strong rebound in crude oil imports, which neared 8 million barrels per day,” said John Kilduff, partner at Again Capital LLC in New York.
Crude oil imports from Saudi Arabia rose to 1.44m b/d, up from 1.32m the previous week, according to EIA data. Imports from several other Opec-member countries also rose.
US September crude was down $1 at $49.86 a barrel at 1655 GMT. It fell intraday after the EIA data to $49.67, two cents below the previous contract low from March.
US crude dropped below $50 on Monday for the first time since April and its 14-day Relative Strength Index (RSI) is below 30. A reading below 30 is considered an indication of an oversold condition by technical traders. Brent September crude was down 52 cents at $56.52, off its session low of $56.16.
US August RBOB petrol pared losses on EIA data showing stockpiles fell last week and data showing distillate stocks fell less than expected lent support to ultra-low sulfur diesel futures.
A drop in oil prices this month is likely to be short-term and will not deflect Opec from its policy of keeping output high to defend market share, delegates from Gulf Opec members and other nations said.
Falling Chinese stock markets and the Greek debt crisis have raised concern about demand, while the Iranian nuclear deal could lead to higher oil exports from the Islamic Republic. Benchmark Brent crude has fallen more than 10 percent in July.
Opec, in a major policy shift, decided in November against cutting its production target of 30m b/d to prop up prices, seeking instead to defend market share against US shale oil and other competing sources. The group reconfirmed the strategy at a meeting in June.
Kuwait’s Oil Minister Ali Saleh Al Omair was quoted on Tuesday as expressing confidence in the outlook, saying producer countries expected stronger global economic growth to boost prices. And three delegates from members of the Opec speaking this month said the price drop was unlikely to last and Opec would not alter strategy, also citing expectations for stronger demand.
“I don’t think so, it is not time for Opec to change,” said a Gulf Opec delegate. “Demand will be more than in the first half (of the year) although there is some uncertainty about the economy. The prices will remain around $60.”
A second Gulf delegate said even if prices fell slightly below $50 a barrel, as long as the drop is for a short time it is unlikely OPEC would lower its output ceiling. “Prices will not stay down forever,” the delegate said.
The Opec policy shift was led by Saudi Arabia, supported by its Gulf allies, despite calls for supply cuts from Iran and smaller producers concerned about the impact of lower prices on oil revenue. Opec does not meet again until December 4.
Reuters
