Fracking & Increased Oil Production Helps Prices Slide Though Geopolitical Pressures

Crude oil eased a few cents in the Asian session to trade at 93.78 while Brent oil gained 7 points to reach 102.71.  On Wednesday West Texas Intermediate fell for the first time in three days as crude stockpiles increased at the biggest U.S. oil-storage hub. Oil prices dropped as much as 0.4 percent in New York. Supplies at Cushing, Oklahoma, the delivery point for WTI contracts, expanded by 508,000 barrels to 20.7 million last week, the Energy Information Administration reported yesterday. That’s the highest level since July. Libya may boost production to 1 million barrels a day by the end of the September, according to state-run National Oil Corp.

WTI is headed for a second monthly loss. Stockpiles at Cushing climbed for a fourth week through Aug. 22, the longest rising streak since January, according to the EIA, the Energy Department’s statistical arm. The U.S. is the world’s largest oil consumer. Crude inventories nationwide fell by 2.07 million barrels to 360.5 million, the data showed. Supplies were projected to decrease by 2.5 million, based on the median estimate in a Bloomberg News survey of 10 analysts. Gasoline stockpiles dropped by 960,000 barrels to 212.3 million, the EIA said. The country’s peak summer driving season, which started on Memorial Day in May, typically ends on Labor Day, which falls on Sept. 1 this year.

Worldwide oil prices have been relatively stable in the face of turmoil and disruptions in major oil producing countries, a fact the Energy Information Administration attributes to growth in U.S. shale oil production. For the past 13 months, Brent crude prices, the benchmark for international oil, has stayed between $107 and $112 a barrel, a difference of $5. Compare 2012 when oil prices fluctuated as much as $125 a barrel in March to as low as $95 in June. From January to July, oil disruptions averaged 3.2 million barrels per day, mostly from Libya, Nigeria, Iran and Iraq. The disruption peaked at 3.5 million barrels per day in May when ISIS militants first invaded the northern Kurdish region of Iraq. It’s the biggest disruption since 1990 and 1991 when Iraq invaded Kuwait. But global oil prices were able to ride out the storm.

The controversial practice of “fracking” helped keep North American fuel prices from soaring this summer even as supply disruptions in the Middle East and North Africa hit a 23-year high. The surge in United States oil production – made possible through horizontal drilling and hydraulic fracturing – has more than offset unplanned supply outages in embattled Organization of the Petroleum Exporting Countries (OPEC) member nations, the U.S. Energy Information Administration (EIA) said Wednesday.

Natural gas on the other hand climbed breaking the psychological $4 price level touching 4.03 ad eased a bit in the Asian session as traders booked profits to trade at 4.001 as weather reports and forecasts across the US call for hotter temperatures. Summer heat makes it more likely people will use their air conditioners, consuming more gas-fired electricity. Unseasonably high temperatures and humidity in parts of the Midwest have led to strong spot trading, boosting prices on the futures curve, Jim Ritterbusch, president of energy-advisory firm Ritterbusch & Associates, said in a note.