Inventory Build, Trade War Fears Generating Selling Pressure

Howard TerryMar 08, 2018

West Texas Intermediate (WTI) crude futures rose three cents to settle at US$62.60 a barrel.

The oil price fall followed weakness in global financial markets after the resignation of Gary Cohn, economic adviser to U.S. President Donald Trump, seen as a bulwark against protectionist forces in the government. This surprise event drove investors out of risky assets on concerns that Washington would go ahead with import tariffs and risk a trade war.

WTI Crude Oil (Light Sweet) price at NYMEХ Stock Exchange down by 0.89% to $62.13 per barrel.

Weakened by the resignation news, oil prices slid further after the American Petroleum Institute estimated inventories had risen by 5.66 million barrels last week in yet another weekly reminder about the excessive volatility reigning on oil markets.

The latest U.S. inventory figures also put bearish pressure on crude, with the build exceeding analysts' expectations.

For 2019, the EIA forecast a crude production increase of 570,000 bpd to 11.27 million bpd.

Perhaps dampening the effects of the crude oil build was a draw in gasoline.

Brent for May settlement fell $1.43 to $64.26 a barrel on the London-based ICE Futures Europe Exchange.

Stockpiles at the key US storage hub in Cushing, Oklahoma tumbled for an eleventh week to the lowest since 2014. Cohn's resignation announcement came after the US markets closed on Tuesday.

As crude oil inventories built for the week, United States crude oil production for week ending February 23 also increased, coming in at 10.283 million bpd, well on its way toward the 10.7 million bpd that the EIA suspects will be seen in 2018.

The EIA said on Tuesday it expects US crude output in the fourth quarter of 2018 to reach an average of 11.17 million bpd, up from the previous forecast a month ago of 11.04 million bpd.

And weekly figures from the American Petroleum Institute released Tuesday showed USA crude inventories rose by 5.66 million barrels for the week ending Friday, the second consecutive week-over-week increase.

If met, this would be the "highest annual average USA crude oil production level, surpassing the previous record of 9.6 million bpd set in 1970", the EIA said in its latest Short Term Energy Outlook issued today.

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