Oil Declines on Bearish U.S. Inventory Data

Source: By Georgi Kantchev, Wall Street Journal • Posted: Thursday, July 2, 2015

LONDON—Oil prices were in the red on Wednesday on bearish U.S. oil inventory data and continuing signs that the world has an oversupply of petroleum that won’t end soon.

August-dated Brent crude, the global oil price benchmark, fell 1.1% to $62.86 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate for delivery in August was trading down 1.5% at $58.59 a barrel.

Late Tuesday, the American Petroleum Institute, an industry group, reported a surprise 1.9-million-barrel build in weekly U.S. oil stockpiles.

The U.S. Energy Information Administration will release its official inventory data later on Wednesday and analysts polled by The Wall Street Journal expect a 1.2 million-barrel drop.

“The build in crude surprised the markets which will now closely watch EIA’s report,” said Michael Poulsen, oil analyst at Global Risk Management. “Expect some volatility ahead of the publishing.”

EIA’s report will also be scrutinized for its weekly U.S. oil production estimate. On Tuesday the agency said that U.S. oil output in April rose to 9.7 million barrels a day, the highest level since 1971.

As investors parse the data for signs how the U.S. shale industry will respond to lower oil prices, members of the Organization of the Petroleum Exporting Countries are ramping up their oil output.

According to JBC Energy, OPEC production has increased by 170,000 barrels a day in June to 31.2 million barrels a day, the highest level since September 2012.

“With these strong growth rates, OPEC supply growth is now challenging non-OPEC supply growth,” JBC said.

Meanwhile, Iran and the West extended talks over Tehran’s nuclear program for a week past Tuesday’s deadline to reach a deal that can eventually unlock millions of barrels of Iranian crude.

U.S. President Barack Obama said he is prepared to walk away from a nuclear deal unless Iran accepts a tight monitoring regime.

The market is also keeping an eye on the Greek debt crisis, which continues to roil financial markets. On Tuesday, the country became the first developed nation to default on its payment to the International Monetary Fund.

Nymex reformulated gasoline blendstock for August—the benchmark gasoline contract—fell 1.1% to $2.0267 a gallon, while ICE gasoil for July changed hands at $573.50 a metric ton, down $0.25 from Tuesday’s settlement.