Oil Prices Settle Lower After Inventory Data

02/28/18 04:54 PM EST
By Alison Sider 

Oil prices slid in volatile trading Wednesday after federal data showed that oil and gasoline are building up in storage as U.S. production climbs to new heights.

Prices tumbled more than 4.7% in February, ending a five-month streak of gains as oil came under pressure at times from a rising dollar and an equity market selloff, in addition to a steady stream of data showing that U.S. output is relentlessly rising.

On Wednesday, U.S. crude futures fell $1.37, or 2.17%, to $61.64 a barrel on the New York Mercantile Exchange. Brent prices fell 85 cents, or 1.28%, to $65.78 a barrel on ICE Futures Europe.

Prices fell after the data showing larger-than-expected increases in storage levels were released. Oil climbed back throughout the day before selling off sharply again as the U.S. dollar rose and investors who have amassed massive bullish positions on crude oil futures seized on an opportunity to sell.

"It just collapsed there right at the end in full force," said Mark Benigno, co-director of energy trading at INTL FCStone.

Crude inventories grew by 3 million barrels last week, and gasoline increased by 2.5 million barrels, according to the U.S. Energy Information Administration. Distillate inventories fell by 1 million barrels. Altogether, total petroleum stockpiles increased by 3.7 million barrels.

Refiners continued to churn out large amounts of fuel for this time of year, and the increase in gasoline inventories weighed on prices for the fuel. Gasoline futures fell 4.57 cents, or 2.53%, to $1.7577 a gallon. Diesel futures fell 4.94 cents, or 2.52%, to $1.9136 a gallon.

Kyle Cooper, a consultant at ION Energy Group, said the increase in gasoline inventories could be a sign that fuel exports are wavering.

"Both gasoline and distillate exports were quite low and while very volatile, are potentially a very bearish development," he said.

At the same time, U.S. production is surging. In revised monthly figures, the EIA reported that output in November reached 10.057 million barrels a day -- breaking a record set in 1970. Output declined to 9.49 million barrels a day in December, the agency said.

Fears that the big gains will blunt the impact of cuts by the Organization of the Petroleum Exporting Countries and others, or even reignite a market-share war among global oil producers, have capped oil's gains. On Tuesday, the head of the International Energy Agency, Fatih Birol, reportedly said that U.S. shale production would help the country surpass Russia as the world's biggest crude producer by 2019 at the latest.

Wednesday's fall in oil prices extended losses from the previous day, when oil prices sold off in tandem with the broader market following statements from Federal Reserve Chairman Jerome Powell made traders more wary of higher interest rates this year.

The rising dollar weighed on oil prices again Wednesday. The WSJ dollar index rose 0.15%.

Tariq Zahir, managing member of Tyche Capital Advisors, said moves like that could become more common.

"If the dollar is getting stronger and equity market getting weaker -- I won't say crude can't go higher, but there are some outside forces in the market we haven't seen in awhile," he said.

--Christopher Alessi contributed to this article.

Write to Alison Sider at alison.sider@wsj.com


(END) Dow Jones Newswires

February 28, 2018 16:54 ET (21:54 GMT)

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