Oil Resumes Drop
(Bloomberg) -- Oil resumed its drop as rising U.S. production and concern over the global economic outlook countered a decline in American fuel inventories.
Futures in New York pared most of Wednesday’s gain to head for their third drop this week. While inventories of winter fuel in the U.S. fell more than expected as cold polar air blasted the nation, crude stockpiles rose as production remained at a record last week. The dollar is strengthening as investors wait to see if the U.S. and China can tamp down a trade war that’s slowing global growth, making commodities priced in the greenback costlier.
Oil has faltered this month after posting the biggest gain since April 2016 in January as increased American production threatens to offset output cuts by the Organization of Petroleum Exporting Countries and its allies. While sanctions on Venezuela and Iran are supportive of prices, investors remain wary before meetings between the U.S. and China next week ahead of a March 1 deadline for trade tariffs to increase.
“The decline in distillate inventories made investors feel the supply-demand balance is becoming tighter than expected,” said Tomomichi Akuta, a senior economist at Mitsubishi UFJ Research and Consulting Co. in Tokyo. Still, multiple uncertainties including the trade war, Brexit and sanctions on Venezuela and Iran are leaving prices stuck in a tight range, he said.
West Texas Intermediate crude for March delivery declined 30 cents to $53.71 a barrel on the New York Mercantile Exchange as of 7:36 a.m. in London, and was down as much as 36 cents earlier. The contract climbed 35 cents to $54.01 on Wednesday.
Brent for April settlement dropped 36 cents to $62.33 a barrel on the London-based ICE Futures Europe exchange. The contract added 71 cents to $62.69 on Wednesday. The global benchmark crude was at an $8.30 premium to WTI for the same month.
U.S. inventories of winter fuels, including propane, shrank by about 4.9 million barrels combined, data from the Energy Information Administration showed Wednesday. Distillate stockpiles alone decreased by 2.26 million barrels in the week through Feb. 1, compared with a decline of 2 million barrels forecast in a Bloomberg survey. U.S. crude output stayed at a record high 11.9 million barrels a day.
The Bloomberg Dollar Spot index has risen 1 percent this month. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead a delegation to Beijing next week to lay the groundwork for a meeting between Presidents Donald Trump and Xi Jinping later this month.
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