Oil futures slip on US inventory data, reports of higher output

Crude oil futures dropped following the release of better-than-expected weekly stockpile data Stateside and a raft of new reports pointing to higher global supplies.

The latest set of weekly figures from the Energy Information Administration´s revealed a build of 1.1m barrels in US commercial crude inventories, against a forecast for a 1.75m-barrel fall from analysts at S&P Global Platts.

However, gasoline and distillate inventories fell by 2.8m and 2.0m barrels, respectively.

That sent West Texas Intermediate crude oil down by 0.92% to $42.38 per barrel and saw Brent fall 0.65% to $44.69 per barrel at 1620 BST.

EIA revises US oil output forecasts higher

In a separate report, also released on Wednesday, the EIA predicted US output would rise to an average at 8.73m barrels a day this year and 8.31 barrels a day for 2017. Those forecasts were up from its previous projections for 8.671m per day and 8.2m a day, respectively. Last year, US producers produced an average of 9.4 barrels a day.

Nonetheless, analysts at Unicredit found those forecasts too optimistic given the restrictions to a futher possible expansion.

“While a slight recovery is quite likely, since rig count numbers have recently increased again, we think that the EIA’s prediction is rather optimistic. The number of oil rigs have increased by 65 since May 2016, but there are still 289 oil rigs fewer than the previous year. The oil price is simply too low to allow for bigger growth rates,” the broker´s commodity strategist Jochen Hitzfeld said.

Riyadh sets new record for production

Saudi Arabia, the world’s largest oil producer, boosted its oil output to a record 10.67m barrels a day in July, according to the oil cartel´s Monthly Oil Market Report which was released on Wednesday.

That fed market chatter that the lynchpin of the Organisation of Petroleum Exporting Countries was intent on heading off Iran´s
own drive to recover its pre-sanctions level of production.

In turn, that raised concerns that major oil producers might not be able to agree on measures to curb growth in the global supply of oil - given their history of not being able to come to an agreement - at their upcoming meeting in Algiers next month.

Increased oil production by OPEC countries and those outside the bloc, such as the US and Russia, over the past two years, had contributed to supply glut that dragged prices down to as low as $26 a barrel in February 2016.

According to OPEC, low oil prices could persist into the foreseeable future due to supply exceeding seasonally slow demand.

Gasoline consumption was expected to taper off in the US with the summer vacation driving season coming to an end. “With the end of the driving season in the third quarter, gasoline demand could see a seasonal downward correction,” the OPEC’s Vienna-based research department said.

Nevertheless, the organisation predicted that world markets would rebalance themselves towards the end of the year with consumption picking up in the Northern Hemisphere with winter approaching.