Written on: October 9, 2014 by ICM
Oil prices slid Wednesday after weekly storage data showed that U.S. stockpiles grew more than expected last week, as imports rose and refineries processed less crude. U.S. oil prices have now fallen 21% from a peak reached in September 2013, meeting the definition of a bear market. Brent, the global benchmark, has been in a bear market since Sept. 30.
Crude-oil stockpiles climbed by 5 million barrels to 361.65 million barrels in the week ended Oct. 3, according to the U.S. Energy Information Administration. Analysts surveyed by The Wall Street Journal had expected stocks to rise by 1.9 million barrels on the week. Imports rose by 428,000 barrels a day to 7.7 million barrels a day.
Global and U.S. oil prices have been sliding for months amid high global supplies and lackluster demand. The U.S. was a bright spot for demand this summer, because refineries ran at unusually high rates to profit from relatively cheap domestic crude. However, refineries typically run at lower rates in September and October as refiners shut units to perform seasonal maintenance. “The oil inventory raised concerns about weak demand,” said Phil Flynn, analyst at the Price Futures Group in Chicago. “There’s a sense that there’s not a lot that anybody can do about it in the short term.”
Light, sweet crude for November delivery slid $1.54, or 1.7%, to $87.31 a barrel on the New York Mercantile Exchange, the lowest level since April 17, 2013. Brent settled down 73 cents, or 0.8%, at $91.38 a barrel on ICE Futures Europe, the lowest settlement price since June 28, 2012.
Brent prices are down 21% from their mid-June high. The sustained drop in oil prices has sparked concern among market participants that U.S. shale-oil drillers could pull back on new investment if prices fall too low. However, Fitch Ratings said Wednesday that shale-oil producers won’t respond until Brent prices fell below $80 a barrel. “We think we’re in a sweet spot for supply at the moment,” said Alex Griffiths, managing director at Fitch, in an interview. “We think that $80 is where you start seeing some deceleration of drilling new shale wells.”
The Organization of the Petroleum Exporting Countries said Wednesday that the average price of its members’ crude stood at $89.37 a barrel, compared with $90.40 the previous day. The OPEC basket hasn’t fallen below $90 a barrel since June 2012. Gasoline stockpiles rose by 1.2 million barrels to 209.7 million barrels. Analysts had predicted stockpiles would decline by 900,000 barrels. November reformulated gasoline blendstock, or RBOB, slumped 4.99 cents, or 2.1%, to $2.3184 a gallon, the lowest price since Dec. 17, 2010.
Distillate stocks, which include heating oil and diesel fuel, rose by 439,000 barrels to 126.1 million barrels. Analysts had expected a 1.2 million-barrel weekly decrease. November diesel slipped 3.14 cents, or 1.2%, to $2.5759 a gallon, the lowest price since June 2012. Refining capacity utilization fell less than expected, to 89.3%. Analysts had expected the operating rate to fall by 0.7 percentage point in the week.
Nicole Friedman at nicole.friedman@wsj.com
