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Oil Feels the Pressure from Bigger-Than-Expected Jump in US Crude Supplies

March 14, 2018 at 16:42 by Andrew Moran

Oil futures are trading lower midweek after a new US government report discovered a larger-than-expected increase in domestic crude supplies. Despite the Organization of the Petroleum Exporting Countries (OPEC)’s efforts to reduce the global supply glut, the US is offsetting these declines with its own output surge.

April West Texas Intermediate (WTI) crude futures tumbled $0.03, or 0.05%, to $60.68 per barrel at 16:25 GMT on Wednesday on the New York Mercantile Exchange. Oil prices have tried to gain momentum in recent trading sessions, but geopolitical events, such as President Donald Trump dismissing Secretary of State Rex Tillerson, have prevented that from happening.

Brent, the international benchmark for oil prices, is also sliding in the middle of the trading week. May Brent crude futures slipped $0.34, or 0.60%, to $64.31 on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), domestic crude supplies climbed by five million barrels for the week ending March 9, while US crude output rose 12,000 barrels to 10.381 million barrels per day (bpd). Gasoline stockpiles fell 6.3 million barrels, while distillate supplies shed 4.4 million barrels.

OPEC released its monthly report on Wednesday and highlighted that the cartel’s oil output decreased by 77,000 bpd in February to 32.19 million bpd. Meanwhile, US crude-oil production is forecast to soar by 520,000 bpd this year, and year-on-year growth is projected to top one million bpd, primarily from the shale revolution.

Both the EIA and International Energy Agency (IEA) have also updated their forecasts to be higher for US oil output. If the US is able to keep up its levels, then it could be the world’s largest crude producer, surpassing Saudi Arabia and Russia.

The latest Hughes Baker oil rig count stands at 796, down from 800 last week.

In other energy markets, April natural gas futures dropped $0.063, or 2.26%, to $2.723 per million British thermal units. April gasoline futures jumped $0.0285, or 1.51%, to $1.914 a gallon. April heating oil futures advanced $0.012, or 0.67%, to $1.886 per gallon.

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