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Oil Tumbles After Build in US Fuel Stocks

December 6, 2017 at 18:11 by Andrew Moran

Oil futures are poised to settle at their lowest levels since the end of November following a new US government report that found a larger-than-expected decline in domestic stockpiles as well as a surge in gasoline supplies.

January West Texas Intermediate (WTI) crude futures tumbled $1.36, or 2.36%, to $56.26 per barrel at 16:56 GMT on Wednesday on the New York Mercantile Exchange. US crude prices are on track for their lowest finish since November 22.

Brent, the international benchmark for oil prices, is also trading in the red midweek. February Brent crude futures dipped $1.32, or 2.08%, to $61.55 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), domestic crude supplies declined 5.6 million barrels to 448.1 million barrels, while US crude output inched higher by 25,000 barrels per day (bpd) to 9.7 million bpd. Gasoline stockpiles jumped by 6.8 million barrels, while distillate stockpiles rose 1.5 million barrels.

Crude prices have been rallying over the last week as Organization of Petroleum Exporting Countries (OPEC) and Russia have agreed to extend the oil output cut agreement by an additional nine months. Oil surged on Tuesday after reports suggested compliance to the arrangement reached 100%.

Despite the losses midweek, oil has been rallying for much of 2017, stabilizing well above the crucial $50 threshold. Year-to-date, US crude prices have advanced more than 10%, while Brent crude prices have soared nearly 15%.

Analysts now say that 2018 should be a big year for oil because of anticipated rising global demand. This has been part of the reason why investors have encouraged OPEC and non-OPEC oil-producing countries to expand the production cut beyond 1.2 million bpd. Although OPEC has reached full compliance, the US shale revolution persists, which could drive US production over 10 million bpd for the first time since the 1970s sometime next year.

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