By Henning Gloystein
SINGAPORE (Reuters) – Oil prices were stable on Wednesday after posting two days of declines at the start of the week.
Support came from a report that U.S. crude inventories are not rising as much as expected during the spring season now starting, implying healthy demand, and from strong China data.
U.S. West Texas Intermediate (WTI) crude futures
Brent crude futures
U.S. crude inventories rose by 1.2 million barrels in the week to March 9, to 428 million barrels, the American Petroleum Institute said on Tuesday. That compared with analysts’ expectations for an increase of 2 million barrels.
Some support also came from China, where January-February domestic crude oil production fell 1.9 percent on the year to 30.37 million tonnes, equivalent to 3.77 million barrels per day (bpd), according to data from the National Statistical Bureau on Wednesday. At the same time, crude oil throughput rose 7.3 percent to 93.4 million tonnes, implying a need for more imports.
Despite this, oil markets remain relatively weak. Prices have not returned to their January highs of over $70 per barrel for Brent and almost $67 for WTI.
“The ever-expanding U.S. supply continues to pose significant downside risk to oil prices,” said Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA.
U.S. crude production
(GRAPHIC: Russia vs Saudi vs U.S. oil production – http://reut.rs/2FrFVMF)
U.S. production is expected to rise above 11 million bpd by late 2018, taking the top spot from Russia, according to the International Energy Agency (IEA).
U.S. bank Goldman Sachs said in a note dated March 13 that there was a “potentially large increase in (U.S.) drilling activity in coming weeks”.
Weekly U.S. crude production figures will be published by the Energy Information Administration (EIA) later on Wednesday.
The increases in U.S. production has this year exceeded the supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), which have been in place since 2017 in an effort by the cartel, and supported by non-OPEC member Russia, to prop up prices.
Estimates by the EIA show global supplies will exceed 100 million bpd for the first time in the second quarter of 2018, while demand will only break through that level in the third quarter, implying a slightly oversupplied market.
That would be a reversal from a supply deficit in 2017 and early 2018.
(GRAPHIC: World oil supply and demand balance – http://reut.rs/2FIxGvP)
(Reporting by Henning Gloystein; Editing by Joseph Radford and Kenneth Maxwell)