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Oil Prices Drop Despite Decline in US Crude Stockpiles, Lower OPEC Production

December 13, 2017 at 16:57 by Andrew Moran

Oil futures are trading lower midweek, despite a new US government report showing a decline in US crude stockpiles and Organization of Petroleum Exporting Countries (OPEC) reporting a decrease in crude output.

January West Texas Intermediate (WTI) crude futures tumbled $0.36, or 0.63%, to $56.78 per barrel at 15:45 GMT on Wednesday on the New York Mercantile Exchange. US crude prices traded higher at the start of the trading session, but has since pared those gains.

Brent, the international benchmark for oil prices, is also bleeding red ink in the middle of the trading week. February Brent crude futures dipped $0.78, or 1.23%, to $62.56 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), US crude stockpiles dropped by 5.7 million barrels, while US crude production increased by 73,000 barrels per day (bpd) to 9.78 million bpd. Gasoline stockpiles jumped by 5.7 million barrels, while distillate stockpiles slipped by 1.4 million barrels.

On Wednesday, OPEC stated in its monthly report that output from member nations declined by 133,500 bpd last month to 32.45 million bpd, which is the lowest level in six months. OPEC officials did note that US output is soaring, something that could dampen expectations to rebalance the international crude market by the end of next year.

But OPEC Secretary-General Mohammad Barkindo is optimistic, telling Bloomberg TV:

We are beginning to see a return to stable markets. Something that has eluded us for several years.

The fundamentals of the oil market have not been this strong in the past several years. Both the global economic rebound, as well as strong oil market fundamentals, for the first time in so many years are all pointing to the right direction.

The US dollar traded lower as the greenback fell by 0.24%. A weaker US dollar is good for commodities like oil because it makes it cheaper for foreign investors to purchase.

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