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Oil Prices Hit by Swelling US Stockpiles

March 23, 2017 at 15:01 by Andrew Moran

Oil prices are being impacted on Thursday by bloated US stockpiles. As US crude stocks surge to a record high, oil futures are retreating, erasing hopes by investors that oil was finally beginning to recover this year.

May West Texas Intermediate (WTI) crude futures tumbled $0.41, or 0.85%, to $47.63 per barrel at 14:31 GMT on Thursday on the New York Mercantile Exchange. US crude is poised to record its lowest settlement in about a week.

Brent, the international benchmark for oil prices, is also sliding. May Brent crude futures dipped $0.33, or 0.65%, to $50.31 a barrel on London’s ICE Futures exchange. Brent prices, which fell under $50 for a short period of time during the Wednesday trading session, are on track to settle at their lowest levels since November.

Oil prices are not mimicking last year’s immense climb. Year-to-date, US crude has plummeted more than 15%, while Brent crude has fallen roughly 13%.

New US Energy Information Administration (EIA) data on Wednesday dashed the hopes of many traders that oil prices would start to recover. According to the EIA, US crude supplies soared by 5 million barrels in the week ending March 17 for a total of 533.1 million barrels, an all-time high. The data also found that US gasoline stocks decreased by 2.8 million barrels and distillate stocks declined by 1.9 million barrels.

Global stockpiles have been increasing, even with cuts to output levels by Organization of Petroleum Exporting Countries (OPEC) members. This is mainly due to rising US oil production. Since mid-2016, US oil output has jumped by about 8% to 9.13 million barrels per day (bpd).

OPEC members will travel to Kuwait for an informal meeting of OPEC and non-OPEC ministers on March 26 to talk about compliance efforts. OPEC will host an official meeting in Vienna in May, when they will discuss the possibility of extending the production cap.

Late last year, OPEC members agreed to slash their oil production levels to 1.8 million bpd, which helped oil prices recover to $50. US oil firms started to take advantage of the higher prices by raising their output, a trend that many investors fear will continue for the rest of 2017.

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