Oil pressured by high U.S. crude exports; drop in crude stocks prevent bigger fall

Reuters SINGAPORE | Updated on February 23, 2018 Published on February 23, 2018

US crude exports jumped to just above 2 million barrels per day (bpd) last week. (file photo)

Oil prices dipped lower on Friday as investor concerns about high US crude exports outweighed an unexpected drop in oil inventories in the world's biggest fuel consumer.

US West Texas Intermediate (WTI) crude futures were at $62.74 a barrel at 0750 GMT, down 3 cents from their last settlement. Brent crude futures were down 2 cents at $66.37 a barrel.

WTI was still on track to rise about 1.7 per cent for the week, and Brent was up 2.2 per cent, with both contracts set for their second weekly gains after falling steeply early in the month.

Friday's dips followed gains during the previous day when the Energy Information Administration (EIA) said US crude stockpiles fell 1.6 million barrels in the week to February 16, to 420.48 million barrels, despite a seasonal slowdown in demand at the end of the northern hemisphere winter season.

“A counter-seasonal draw should always be taken bullishly -as it has been - but this week's net crude imports were very low,” US investment bank Jefferies said, adding that "extremely low” imports also contributed to the draws.

Other analysts pointed to the shape of the oil price curve as the reason for the stock draw.

“Part of that (inventory fall) is the shape of the oil curve which makes it uneconomic to store product,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

The forward price curves for Brent and WTI are in a shape known as backwardation, in which prices for immediate delivery are more expensive than those for later sale, making it uneconomical for traders to buy and store oil.

While the reduction in US inventories supported crude prices, America's low imports and surging exports were weighing crude down, traders said.

US crude exports jumped to just above 2 million barrels per day (bpd) last week, EIA data showed, close to a record high of 2.1 million hit in October. That helped pull down net imports to below 5 million bpd, the lowest level since the EIA started recording the data in 2001.

US crude oil production was virtually unchanged last week at 10.27 million bpd, close to the levels of top producer Russia and more than Saudi Arabia, the world's biggest oil exporter, currently pumps.

Published on February 23, 2018
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