Oil Bears Beating Up On The Bulls

Oil ups and downs kept the traders ill at ease on Wednesday. WTI oil prices tumbled over $1 to trade at 43.88 with Brent oil falling 2% to 46.14. Oil climbed in the early part of the day but then reversed moves after the weekly EIA inventory in the US reported lower than expected, which should have been a boom. But the EIA also reported that inventories of distillates, which include diesel and heating oil, rose by 4.6 million barrels in the week to Sept. 9, versus analysts’ expectations of an increase of 1.5 million barrels. That build weighed on broader market sentiment, forcing crude futures to reverse gains.

“A build to gasoline stocks amid lower runs and lower product supplied counters the bullish theme, as does a strong build to distillates,” said Matthew Smith, analyst at New York-based crude cargo tracker ClipperData. “So, it’s a mixed report -bullish crude and bearish products.”

Both Brent and WTI rose briefly after the EIA reported the latest crude drawdown, which followed the previous week’s surprise decline of 14.5 million barrels. That earlier draw, the most for a week since 1999, was due to Tropical Storm Hermine delaying oil arrivals into the U.S. Gulf Coast for several days. “So, the million-dollar question is really a 14.5-million-barrel question … as in where did all those barrels go to? The market was expecting some sort of a ‘make up call’ after last week’s storm affected mega-draw,” said David Thompson, executive vice president at commodities-focused broker Powerhouse in Washington.

The International Energy Agency released a report saying it expects a more pronounced global economic slowdown will lessen demand for crude. Oil prices extended losses on Wednesday after falling by as much as 3 per cent in the previous session amid concerns that rebalancing the global oil market will take longer than originally envisaged. Prices had been supported earlier in the session by data from the American Petroleum Institute which showed a crude build of 1.4 million barrels for the week ended Sept. 9, smaller than the 3.8-million-barrel rise expected by analysts.

Commerzbank said in a note that the delay in rebalancing is largely due to a rise in production from members of the Organization of the Petroleum Exporting Countries and that the market would be balanced already if OPEC had maintained its production at May’s levels.

Reuters reported that “Rather than talking about capping oil production as it was planning to do at the end of September, OPEC would be better advised to think about reversing the production growth of recent months,” Commerzbank analyst Carsten Fritsch said.

OPEC members are due to meet informally in Algeria this month on the sidelines of the International Energy Forum (IEF). Russia is also expected to attend the IEF.

The chairman of Libya’s National Oil Corporation visited the port of Zueitina on Wednesday and said he would work to lift force majeure there, according to the head of a guard force in control of the terminal.

The organization, which represents 29 major oil-importing nations including the U.S., also noted that supplies from the OPEC oil cartel are running at near-record levels as Kuwait and the United Arab Emirates pump at their highest levels ever. It added that non-OPEC supply is expected to return to growth next year.