Crude drops in face of gasoline hoard traders 'can't hide from'

The price of gasoline shown on a gas station sign in Encinitas, California August 4, 2015. — Reuters pic
The price of gasoline shown on a gas station sign in Encinitas, California August 4, 2015. — Reuters pic

NEW YORK, Dec 7 — Oil had its worse day in two months as a surge of gasoline supplies held in US storage tanks signals refiners will need less crude.

West Texas Intermediate oil futures slid 2.9 per cent, while gasoline tumbled to its lowest in almost seven weeks. American gasoline inventories rose by 6.78 million barrels last week, the most since January, the US Energy Information Administration said.

That exceeded the estimates of every analyst in a Bloomberg survey and overshadowed a third weekly slide in crude stockpiles. Meanwhile, US refineries boosted operating rates for a seventh straight week, contributing to the excess supplies shunted into storage.

Although US gasoline stockpiles typically expand at this time of year, last week’s increase was “a bigger number than people were looking for,” Craig Bethune, a senior portfolio manager at Manulife Asset Management, said by telephone. “Can’t hide from that.”

Oil topped US$59 (RM239) a barrel last month for the first time since mid 2015 as production cuts by the Organization of Petroleum Exporting Countries and allied producers such as Russia chewed into a worldwide glut.

Meanwhile, US shale explorers have been a thorn in the side of the Opec-led coalition, boosting output on an almost-weekly basis all year long.

West Texas Intermediate for January delivery fell US$1.66 to settle at US$55.96 a barrel on the New York Mercantile Exchange, the lowest close in more than two weeks. Total volume traded was about 5 percent below the 100-day average.

Brent for February settlement dipped US$1.64 to end the session at US$61.22 on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of US$5.19 to February WTI.

Gasoline futures declined 3.4 per cent to settle at US$1.6609 a gallon, the lowest since Oct. 19.

US crude supplies shrank by 5.61 million barrels to 448.1 million in the week ended Dec 1, the EIA data showed. Crude production also crept higher, climbing for a seventh week. Gasoline stockpiles rose to 220.9 million barrels, with supplies in the Central Atlantic region increasing by the most since February.

“What we are looking at is a market, at least today, that was weak across the board. The statistical release was very bearish,” Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida, said by telephone.

“There is no reason to think that refinery utilization rates are going to taper off at any point in the next six to eight weeks. With high runs and winter weather, gasoline stocks are going to build.”

Oil-market news

Nigeria’s crude output averaged 1.69 million barrels a day in November, according to Nigeria’s Ministry of Petroleum Resources.

Exxon Mobil Corp is joining Chevron Corp and other US refiners to supply the recently opened Mexican fuel market.

Exiting the Opec-led accord that oil producers last month agreed to extend through end of 2018 may take from three to six months, Tass reported, citing Russian Energy Minister Alexander Novak. — Bloomberg

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