US running out of space to store oil
In terms of demand, the federal government said this week USA commercial crude oil inventories increased by 7.8 million barrels for the week.
Oil prices have been extremely volatile since the start of the year, and in particular this week, as a string of bullish indicators like a slump in the dollar.DXY and potential talks on output cuts clashed with bearish reports of record USA crude inventories, higher output and a slowing global economy. “And because it offers investors three times the exposure, the impact on the underlying futures is magnified – as is the volatility in the ETN, whose price more than doubled in the first three weeks of January before halving again as oil futures rebounded”, according to Reuters.
West Texas Intermediate for March delivery slid as much as 35 cents to $31.37 a barrel on the New York Mercantile Exchange earlier Friday before reversing direction and climbing 26 cents to $31.98 at 10:17 a.m. London time.
An improvement in Chinese services activity also lent support to prices. The move to lower prices would help the world’s largest exporter of crude defend its most lucrative markets against encroachment from rival producers such as Iran, which is ramping up its output now that Western sanctions have been lifted. The WSJ’s Rick Carew explains.
It is reported that Organization of the Petroleum Exporting Countries (OPEC) emergency meeting resumed. OPEC’s output, meanwhile, has remained stable last month, at 32.4 million barrels a day, according to analysts at JBC Energy.
Traders said liquidity was low due to the Lunar New Year holiday which will last for most of next week.
Offering calculation of cash operating cost for all oil fields, it said that at $30 a barrel for oil, 5.3 million barrels a day is cash negative, and at $25 a barrel, 7.7 million barrels a day is cash negative.
The build reflected decreasing demand for gasoline – refineries last week operated at 86.6 percent of capacity, 0.8 percent lower than the week prior and a falloff of several percentage points from January when capacity topped 90 percent. ICE gas oil changed hands at $US314.50 a metric ton, down $US4.75 from the previous settlement.