WSJ: Oil Prices Lower on Global Oversupply Concerns
IEA says U.S. oil output is slowing, but is offset by production rising in Saudi Arabia and Russia
LONDON—Oil prices traded lower on Thursday as renewed concerns about the global oversupply put a dent in the recent rally.
After losing half of its value in 2014, oil rebounded in recent months and is up almost 40% from its lows earlier this year on expectations that soaring U.S. oil production will start to decline. But on Wednesday, the International Energy Agency said while U.S. oil output growth is slowing, production is on the rise in other major players like Saudi Arabia and Russia, which is offsetting the U.S. slowdown.
Brent crude for June delivery recently fell 0.3% to $66.65 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June were trading at $60.20 a barrel, down 0.5% from Wednesday’s settlement.
“Prices seem to be going nowhere,” said Daniel Ang, analyst at Phillip Futures. “The fight between oil bulls and bears continue, and it is difficult to pick a side.”
Oil prices were under pressure despite U.S. crude stockpiles falling for the second consecutive week. Data by the U.S. Energy Information Administration on Wednesday showed stockpiles declining 2.2 million barrels last week.
U.S. oil production, however, increased over the week and held near a multi-decade high at 9.4 million barrels a day.
“Production... continues to disappoint as it has not yet to start significant decrease,” Mr. Ang said.
In its closely watched monthly oil report on Wednesday the IEA said that not only does the decline in U.S. crude inventories pale in comparison with the massive builds of the first quarter, but there are also signs that petroleum product stocks are rising.
Global crude supply was up 3.2 million barrels a day in April, the IEA said. It said while U.S. oil production is slowing, the rest of the oil patch isn’t standing still and pockets of supply growth are emerging from unsuspected corners.
“The market may be starting to lose its upside momentum as the vast majority of the data points circulating around the media airwaves are pointed toward the bearish side,” said Dominick Chirichella, analyst at the Energy Management Institute. “The next several sessions will set the stage as to whether or not the rally will continue or the market will enter into an overdue correction.”
Nymex reformulated gasoline blendstock for June—the benchmark gasoline contract—fell 0.2% to $2.0374 a gallon, while ICE gas oil for June changed hands at $611 a metric ton, down $3.50 from Wednesday’s settlement.
