Oil Drops Below $53 as Report Shows Rising US Crude Stockpiles

USA crude oil inventories surged last week to another record high, while gasoline stocks went the other direction, posting their largest one-week drop in almost six years, the Energy Information Administration said on Wednesday. The commercial crude inventory remained above the upper limit of the average range for this time of year.

The nation’s crude stockpiles expanded by 11.6 million barrels last week, the ninth consecutive gain, according to people familiar with data from the American Petroleum Institute Tuesday.

Now, the EIA has significantly ramped up its US forecasts, predicting daily domestic output of 9.2 million barrels for this year and then 9.7 million barrels in 2018.

Last year, OPEC countries along with Russian Federation and few others have agreed to cut down production by 1.8 million barrels a day as the prices of crude were on a southbound journey. The advent of US shale oil may have discouraged oil companies from investing in larger, longer-term projects, he said.

She cautioned that while the “amazing” improvements in technology and operations are sustainable, US production could be limited if servicing and labor costs rise too quickly. At some point, however, services costs will demonstrate their cyclical nature and begin to rise. The one bright spot, USA shale, should keep the market in check for the next couple of years, but limited outlays over the past few years during the current price slump will eventually bite. USA crude futures, also known as West Texas Intermediate (WTI), fell 19 cents, or 0.3 percent, to $53.14 a barrel as of 0109 GMT after closing the previous session up 1.4 percent.

The April WTI futures contract is especially susceptible under $52.13.

Cooperation with OPEC resulted in a $50 to $60 per barrel oil price and investment is also beginning to return. Their net length fell to 526 million barrels in the week to February 28, from a historic high 557 million barrels the week before.

In the next five years, capacity additions totalling 860 thousand barrels per day (kb/d) will be made, but as a sign of the relative maturity of its downstream industry, all of these are expansion projects at existing refineries, it noted. Natural gas gross withdrawals in the Lower 48 states also decreased in 2016, averaging 80.39 billion cubic feet per day (Bcf/d), or 1.03 Bcf/d (1.3%) lower than in 2015.

Fitch’s latest price forecasts are shown below.

Exxon Mobil (XOM) shares dipped 0.6% in midday trading on the stock market today. The dollar gained 0.1 percent against the yen to trade at 113.98, while the Australian dollar solidified 0.3 percent gains to trade at $0.7603 on Tuesday.