MW: Oil prices struggle to move higher, haunted by higher U.S. supply
Crude futures slipped Thursday after a surprise buildup in U.S. crude stockpiles last week, but their loss was limited by a weaker U.S. dollar.
In fact, crude prices were modestly higher earlier Thursday, before moving lower. On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG7, -0.57% traded at $52.23 a barrel, down 26 cents, or 0.5%, in the Globex electronic session. February Brent crude LCOG7, -0.61% on London’s ICE Futures exchange slipped 26 cents, or 0.5%, to $54.19 a barrel.
The dollar was last down 0.5% at 93.19, according to the Wall Street Journal Dollar Index BUXX, +0.04% , which measures the U.S currency against more than a dozen rivals. As oil business is conducted in dollars, a weaker U.S. currency means cheaper oil for foreign traders.
The market is slightly bearish after the Energy Information Administration reported U.S. crude stocks rose by 2.3 million barrels in the week ended Dec. 16, upending market expectations for a decrease.
“At 485.4 million barrels, U.S. crude-oil inventories are at the upper limit of the average range for this time of year,” the EIA said.
Analysts said higher imports were likely behind the unexpected increase. Net imports grew by 1 million barrels to 7.9 million barrels in the period.
In the same week, refineries operated at 91.5% of capacity, resulting in higher gasoline production at about 10.2 million barrels a day, while distillate fuel production rose to more than 5.1 million barrels a day.
Oil prices also came under pressure after Libya’s National Oil Co. said long-closed pipelines had reopened in the country’s west. The new production, if sustained, could supply 270,000 barrels a day of crude in the next three months.
Libya’s announcement comes as the world remains awash with surplus oil. Last month, members of the Organization of the Petroleum Exporting Organization and other major producers agreed to trim output by around 2 million barrels a day, or nearly 2% of global production.
Traders will be watching to see whether producers will underreport production, a behavior that surfaced in past attempts to rein in global output.
“We see risk that at least some of the market’s bullish sentiment will dissipate over time in the absence of confirmation that compliance is strong and the market has actually shifted to a deficit,” said Tim Evans, a Citi Futures analyst.
Nymex reformulated gasoline blendstock for January RBF7, -1.58% — the benchmark gasoline contract — fell 64 points to $1.5991 a gallon, while January diesel traded at $1.6421, 20 points higher.
ICE gasoil for January changed hands at $481.75 a metric ton, down $4.50 from Wednesday’s settlement.
