Crude oil prices dropped by over one per cent wednesday with the global benchmark crude, Brent slumping by $1.7 or 1.2 per cent, while the United States crude declined by $1.07 or 1.7 per cent after data showed that the United States’ crude inventories rose unexpectedly.
While the US West Texas Intermediate (WTI) dropped 1.2 per cent to $67.60 per barrel, Brent, the international benchmark, was down 1.7 per cent to $72.99 per barrel.
A data released wednesday by the Energy Information Administration (EIA), the official energy information of the US, showed that the country’s commercial crude inventories jumped by 3.8 million barrels in the week ending July 27.
Reuters reported that analysts had expected a drawdown of between 2.5 and three million barrels last week.
However, unofficial estimates from the American Petroleum Institute, a group that represents oil and gas producers, on Tuesday showed a crude inventory build up of 5.59 million barrels.
Crude prices saw the biggest monthly declines in two years in July, shedding about seven per cent after the Organisation of Petroleum Exporting Countries (OPEC) and other supply-cutting countries led by Russia agreed to roll back coordinated production constraints that had been bolstering prices since last year.
The cartel ramped up production to the highest level of 2018 last month, with an output boost of about 70 million barrels per day.
US crude stocks rose last week as imports jumped, while petrol stocks decreased and distillate inventories rose, the EIA said in a report wednesday.
Crude inventories rose by 3.8 million barrels in the week to July 27, compared with analysts’ expectations for a decrease of 2.8 million barrels.
However, crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.3 million barrels, EIA said.
Refinery crude runs rose by 195,000 barrels per day, EIA data showed, while refinery utilisation rates rose by 2.3 percentage points.
Petrol stocks fell by 2.5 million barrels, compared with analysts’ expectations for a 1.3 million-barrel drop.
The EIA data also showed that distillate stockpiles, which include diesel and heating oil, rose by 3 million barrels, versus expectations for a 264,000-barrel increase.
Before yesterday’s slump in oil prices, Brent crude rose to $75 per barrel on Monday, as traders kept the focus on global supply disruptions and the effects of the United States’ sanctions on Iran.
The supply of crude oil to the international market has suffered disruptions in the Middle East.
For instance, Saudi Arabia suspended oil shipments through the Red Sea’s Bab al-Mandeb strait, one of the world’s most important sea routes for crude oil, after Yemen’s Iran-backed Houthis attacked two ships in the waterway.
Also, looming US sanctions on Iran have started to curtail exports from that country.
The sanctions on Iran, OPEC’s third-largest producer, could result in further supply reductions from the Middle East.
OPEC had on November 27, 2015, decided to pump as much as it could to defend its market share, an action that sent the price of oil to a low of $27 per barrel in February 2016.
Following the drop in oil price to an all-time low, OPEC and other major producers, including Russia started to withhold output in 2017 to rein in oversupply that had depressed prices since 2014.
OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and re-balance the market.
However, the cartel and its allies agreed last month to boost supply after US President, Donald Trump, urged the producers to offset losses caused by his country’s new sanctions on Iran and to dampen prices.
On June 22-23, OPEC, Russia and other non-members agreed to return to 100 per cent compliance with oil output cuts that began in January 2017, after months of underproduction in Venezuela and elsewhere pushed adherence above 160 per cent.
Saudi Arabia said the decision would translate into an output rise of about one million bpd.
Oil price had hit $80 per barrel earlier this year, the first time since 2014. (Thisday)