Oil heads for longest losing run in a month as glut fears arise

Oil is losing steam as it heads for the longest falling streak in almost a month after investors were confronted with signs a global glut may persist. Futures in New York fell as much as 0.9 percent, after losing about 1 percent in the previous two sessions. An industry report was said to show that U.S. crude inventories rose 5.32 million barrels last week, more than six times higher than the median estimate in a Bloomberg survey before Wednesday’s government data.

Oil had recovered from last month’s losses after U.S. President Donald Trump appointed hawkish officials to his government, signaling the nation may pursue a more hard-line approach toward OPEC-member Iran. Still, fears remain that surging American production could thwart efforts by the Organization of the Petroleum Exporting Countries and its allies to reduce a global oversupply, and investors are keeping a close eye on U.S. inventories.
“The expectations of a rise in inventories have weighed on the price,” said Daniel Hynes, a senior commodities strategist at Australia & New Zealand Banking Group. “Coming into March, there was a fairly broad feeling that inventories were going to rise significantly. Anything lower than expectations will turn around weakness that we’re seeing today.” West Texas Intermediate crude for May delivery fell as much as 60 cents to $64.65 a barrel on the New York Mercantile Exchange, and traded at $64.75 at 12 p.m. in Singapore. The contract dropped 30 cents to $65.25 on Tuesday. Total volume traded was about 32 percent below the 100-day average. Brent for May settlement declined 45 cents to $69.66 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $4.91 premium to WTI.

Yuan-denominated oil futures on the Shanghai International Energy Exchange lost as much as 4.7 percent from Tuesday’s settlement price to 406.5 yuan a barrel on their third trading day. The daily downside limit is set at 5 percent from the settlement price. In the U.S., the American Petroleum Institute’s figures were much higher than the 850,000-barrel increase forecast in a Bloomberg survey. Stockpiles at the key storage hub of Cushing, Oklahoma, increased by 1.66 million barrels last week, API said, compared with a Bloomberg forecast for a 1 million barrel gain.

Other oil-market news:

  • Louisiana Offshore Oil Port, which is known as LOOP, confirmed that it completed its second supertanker loading operation at its deepwater facility this month, according to a statement on its website.
  • Saudi Arabia’s initial public offering of state oil company Aramco could be delayed until early 2019, pushing back a central plank of the Prince’s plan to modernize the country’s economy, Crown Prince Mohammed bin Salman told Reuters in an interview.
  • If Chinese crude contracts on the Shanghai bourse continue to trade at a premium to other international oil benchmarks, watch for global traders selling into the exchange against buying on foreign bourses to take advantage of arbitrage opportunity, FGE said in emailed March 27 note.

Sources and photo-credits: Bloomberg with assistance by Tsuyoshi Inajima