Oil Falls as Shale Increases U.S. Stockpiles

02/08/18 04:42 PM EST
By Christopher Alessi 

Oil prices fell for the fifth session in a row Thursday on the back of surging U.S. production and rising inventories.

Light, sweet crude for March delivery fell 64 cents, or 1%, to $61.15 a barrel on the New York Mercantile Exchange, closing at a one-month low. Brent, the global benchmark, declined 70 cents, or 1.1%, to $64.81 a barrel.

Crude prices have given up nearly all of this year's gains, down 7% over the last five sessions. Prices have come under pressure this week amid a broader market selloff that has taken U.S. stocks into correction territory for the first time in two years.

The Dow Jones Industrial Average fell more than 1,000 points, closing down more than 4% on Thursday. The S&P 500 fell 3.9%, and both indexes are down 10% from all-time highs reached in January.

Meanwhile, analysts have been growing increasingly concerned about the impact of U.S. shale production in re-flooding the oil market with supply, as prices have climbed this year.

The U.S. Energy Information Administration on Wednesday reported U.S. crude output climbed to 10.251 million barrels a day last week -- a weekly record -- mainly as a result of relentless shale production. The agency also said that stockpiles of crude rose by 1.9 million barrels in the week ended Feb 2.

The EIA's weekly data came on the heels of an upwardly revised forecast for total U.S. production this year and next. The agency now expects U.S. output to average nearly 10.6 million barrels a day this year and 11.2 million barrels a day in 2019.

"The U.S. cannot stop producing," according to analysts at consultancy JBC Energy. "Once the weekly EIA data showed crude output assessments at 10.25 million barrels a day, selling pressure started to mount in earnest," the analysts wrote in a daily note Thursday.

Shale should continue to pressure the market, many analysts say.

Bjarne Schieldrop, chief commodities analyst at SEB Markets, said oil markets continue to be in a "kind of shale oil denial" that is still supporting prices.

U.S. producers are pumping more oil after cuts by major producers, a weak dollar and geopolitical threats to supply sent crude prices roughly 50% higher in the second half of 2017. Those changes made more U.S. production profitable, allowing them to open their taps.

Oil market observers are looking ahead to weekly data from Baker Hughes on Friday on the number of active rigs drilling for oil in U.S. The Organization of the Petroleum Exporting Countries and the International Energy Agency both release their monthly oil market reports at the start of next week.

Gasoline futures fell 0.1%, to $1.7650 a gallon, and diesel futures fell 0.5%, to $1.9213 a gallon.

--Stephanie Yang contributed to this article.

Write to Christopher Alessi at christopher.alessi@wsj.com


(END) Dow Jones Newswires

February 08, 2018 16:42 ET (21:42 GMT)

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