Crude Prices Shed 3% after EIA Release

Crude oil prices today extended its losses after a very shocking rise in US crude stocks that raised worries concerning the supply glut that has had prices pinned down for the last 2 years. A 2.5 million barrels rise in crude stockpiles to a total of about 523 million barrels was reported in the week through August 19 as the report showed a slump in refinery inputs and gasoline production weakened. According to the Energy Information Administration, analysts had anticipated a 455,000 barrel drop.

Crude oil imports in the US also averaged over 8 million barrels per day, 449,000 barrels higher than last week’s daily average. “Over the last four weeks, crude oil imports averaged 8.5 million barrels per day, 13.3 percent above the same four-week period last year”, the EIA stated.

Gasoline stocks were reportedly 36,000 barrels higher compared with the anticipations mounted by a poll conducted by Reuters where a 1.2 million barrel drop was projected. The EIA data also reported a 122,000 barrel rise in distillate stockpiles, which include heating oil and diesel against the 400,000 barrel increase anticipated by analysts. US West Texas Intermediate (WTI) futures was $1.60 lower, or 3.3%, trading at $46.50 a barrel by 11:37 a.m. EDT. Brent crude futures slid $1.13, or 2.3%, to $48.83.

Tariq Zahir, who trades WTI time spreads for Tyche Capital Advisors in New York stated that, "I cannot continue to stress that at this time of year that we are supposed to be getting draws. But instead we're seeing a build in every single aspect that's quite eye opening. The Street has gotten it wrong again, with predictions that you'll start getting rebalancing of supply-demand in the third quarter."

"While we can envision WTI slippage to around the $45 mark next week, we feel that OPEC prattle regarding a possible cohesive effort to restrain production will continue to encourage an influx of speculative capital on price pullbacks of around $2-$3 from yesterday’s settlement," said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Oil reversed earlier from a bear to a bull market this month as revived concerns of an oil glut was dampened by speculations that the OPEC will agree to an output freeze with non-members led by Russia at a meeting in Algeria next month. A similar idea failed in April and analysts are still skeptical on whether it will work now as some OPEC members keep pumping at high levels even as they campaign for a halt.

Olivier Jakob, managing director at PetroMatrix, an energy consultancy in Zug, Switzerland stated that, "There is currently a race to print any freeze headlines but we have not yet seen strong substance behind them.”

Crude futures rose earlier this week on the trail of speculations that Iran will back the OPEC plan, the country has progressively raised crude exports since the end of Western sanctions in January.