5 key signatories to the OPEC output deal meet in Kuwait on Sunday
Oil prices finished slightly higher Friday, but logged their third weekly loss in a month.
Traders continued to weigh signs of OPEC-led cutbacks in global crude production ahead of a meeting of oil producers this weekend, against data pointing to the likelihood of further gains in U.S. output.
May West Texas Intermediate crude CLK7, +0.92% rose 27 cents, or 0.6%, to settle at $47.97 a barrel on the New York Mercantile Exchange. It touched intraday highs above $48 early Friday following news that Saudi Arabia said it cut oil exports to the U.S. in March by around 300,000 barrels a day.
For the week, May WTI oil futures saw a loss of about 1.7% from the week-ago settlement of $48.78 for the April contract, which was the front month at the time. The May contract itself lost 2.7% for the week, according to FactSet data.
May Brent crude LCOK7, +0.81% added 24 cents, or 0.5%, to $50.80 a barrel—for a weekly loss of about 1.9%.
For the session, “oil managed to rebound not because of an uptick in buyer interest, but because of book-squaring into this weekend’s OPEC gathering,” Tyler Richey, co-editor of the Sevens Report, told MarketWatch.
Five representatives of the countries that signed up to the output agreement—Kuwait, Algeria, Venezuela, and non-OPEC nations Russia and Oman—will meet in Kuwait on Sunday to review the current level of compliance. Most members of the Organization of the Petroleum Exporting Countries are adhering to their pledges to make cuts, but data suggest not all non-OPEC producers are sticking to their quotas.
If OPEC says ‘something crazy while electronic markets are closed between now and Sunday night, it could cause futures to gap higher at next week’s open.’
“There is no question that OPEC is losing its grip on the market, but if they say something crazy while electronic markets are closed between now and Sunday night, it could cause futures to gap higher at next week’s open,” Richey said.
But then there’s the U.S., which isn’t part of the agreement.
“OPEC has done their part, but U.S. inventory data is still rising, keeping the lid on the oil price,” said Naeem Aslam, chief market analyst at Think Markets.
Data on the number of active U.S. oil rigs from Baker Hughes BHI, -0.29% released Friday revealed a rise of 21 to 652 rigs this week—suggesting the likelihood of a rise in domestic production to come. The oil rig count has climbed every week this year so far, except for one.
Elsewhere in the energy spectrum, gasoline for April RBJ7, +1.34% settled up 1% at $1.605 a gallon, to end the week up 0.4%, while April heating oil HOJ7, +1.12% added 0.5% at $1.498 a gallon, down about 0.7% for the week.
Trades look for hints on potential for OPEC output cut extension
Oil prices settled lower Tuesday in volatile trading tied to the expiration of the April futures contracts, ahead of data expected to reveal a rise in weekly U.S. crude supplies.
Traders also kept an eye out for hints on whether the Organization of the Petroleum Exporting Countries will extend the production-cut agreement between its members and other major producers beyond June. OPEC sources have indicated that members increasingly favor an extension but want the backing of non-OPEC oil producers, which have yet to deliver fully on existing cuts.
April West Texas Intermediate crude CLJ7, -1.49% declined by 88 cents, or 1.8%, to settle at $47.34 a barrel on the New York Mercantile Exchange. The contract, which expired at the settlement, finish at their lowest level since November, according to FactSet data. May WTI CLK7, -0.58% which is now the front-month contract, shed 67 cents, or 1.4%, to finish at $48.24 a barrel.
May Brent crude LCOK7, -0.51% lost 66 cents, or 1.3%, to $50.96 a barrel on the ICE Futures exchange in London.
“WTI crude oil was unable to hold on to early gains despite a falling U.S. dollar providing support to commodity prices in general,” Colin Cieszynski, chief market strategist at CMC Markets, told MarketWatch.
“Given the high volatility and big surprises in both directions of the last three weeks, it appears some traders may be going to the sidelines ahead of the [supply data] news, while others may be expecting a big build after last week’s surprise decline,” he said.
Petroleum inventory data are due out from the American Petroleum Institute late Tuesday and Energy Information Administration early Wednesday. Analysts surveyed by S&P Global Platts forecast a climb of 2 million barrels in crude inventories for the week ended March 17.
“A lot of the recent volatility in oil has been around traders trying to figure out if the big build we saw in U.S. inventories in the winter is over or not,” said Cieszynski. EIA data released last week showed the first decline in crude stockpiles in 10 weeks.
The world’s biggest crude exporter is conceding ground to shale producers in the U.S., people familiar with current Saudi policy said. Saudi Arabia’s crude exports to the U.S. for the week ended March 10 fell by 426,000 barrels a day compared with the previous week, according to U.S. data.
Elsewhere in energy trading, April gasoline RBJ7, -0.28% fell by 0.4% to $1.605 a gallon, while April heating oil HOJ7, -0.39% lost 0.7% to $1.503 a gallon.
April natural gas NGJ17, -0.32% settled at $3.093 per million British thermal units, up 1.7%.
US crude settles at $48.86, up 2.4% on stockpile drop, snapping 7-session losing streak
Futures Now: Crude oil breaks losing streak
Oil prices rose more than 2 percent Wednesday, lifted by a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts should create a crude deficit in the first half of 2017.
Data from the U.S. Energy Information Administration (EIA) showed U.S. crude stocks fell last week, dropping after nine consecutive increases.
Inventories fell by 237,000 barrels in the week to March 10, compared with analysts’ expectations for an increase of 3.7 million barrels.
The IEA said global inventories rose in January for the first time in six months despite OPEC output cuts, but said if it stuck to its production curbs the market should see a deficit of 500,000 barrels per day (bpd) in the first half.
“For those looking for a rebalancing of the oil market the message is that they should be patient, and hold their nerve,” the IEA said in its monthly report.
Brent futures were up 83 cents, or 1.6 percent, at $51.75 a barrel by 2:39 p.m. ET (1839 GMT). Prices had hit a three-month low of $50.25 during the previous day’s trading.
Prices extended gains after the U.S. Federal Reserve raised interest rates in a widely anticipated move that sent the dollar index lower. A weaker greenback makes dollar-denominated crude oil more affordable to holders of other currencies.
EIA also reported gasoline stocks fell by 3.1 million barrels, compared with analysts’ expectations in a Reuters poll for a 2 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, were down 4.2 million barrels, versus expectations for a 1.7 million-barrel drop.
Earlier, the IEA reported global inventories rising in January for the first time in six months despite OPEC cuts since Jan. 1, but said if OPEC stuck to limits the market should see a deficit of 500,000 barrels per day (bpd) in the first half of 2017.
“As long as OPEC stays on track and non-OPEC delivers on their agreed cuts, the market will continue to balance,” said Ole Hansen, head of commodity strategy at Saxo Bank.
The Organization of the Petroleum Exporting Countries said at the end of November it would cut 1.2 million bpd during the first half of 2017, and then in December reached a deal with non-OPEC producers to cut about 600,000 bpd from their output.
Matt Smith: US oil inventories at record highs
Despite OPEC compliance with its share of the cuts, stockpiles have continued to rise, in part because OPEC members pumped heavily before cuts kicked in and also because U.S. shale producers have raised output as Brent spiked above $58 in January.
Last week, prices plummeted more than 5 percent, the biggest drop in a year, as U.S. crude inventories surged much more than expected to a record high.
“While such patience (counseled by the IEA) may indeed benefit longer-term investors it may not be much help for money managers facing year-to-date losses on long positions, whether longer-term holdings benchmarked to the December 30 Brent closing price of $56.82 or purchased over the long period of range trading over the first ten weeks of the year,” Tim Evans, Citi Futures’ energy futures specialist, said in a note.
“Surplus inventories and rising U.S. production may be more of a worry to them.”
FILE – An oil storage tank and crude oil pipeline equipment is seen at the Strategic Petroleum Reserve in Freeport, Texas, U.S., June 9, 2016.
NEW YORK — Oil bulls trying to push the crude market higher finally waved the white flag Wednesday, triggering the biggest rout in a year on concerns that stubbornly high inventory levels would persist despite supply cuts.
Prices had been locked in the tightest trading range in over a decade as traders and speculators piled into bets that oil prices would rise after the world’s top producers cut output.
For weeks, they shrugged off record high inventories in the United States until Wednesday, when the market finally blinked.
Global oil benchmark, Brent and U.S. crude’s West Texas Intermediate prices plunged more than 5 percent — the biggest drop since February 2016 — an unwelcome reminder of the darkest days of a two-year price war that left many U.S. shale producers with beleaguered balance sheets.
The move also lifted trading volumes to the highest since early December, with over 430,000 contracts in Brent crude for May delivery and more than 911,000 contracts of WTI for delivery in April changing hands.
The selloff continued Thursday, as U.S. crude hit a low of $48.79 a barrel in early trading, its first drop below $50 all year, while Brent crude touched a low of $51.60 a barrel, its lowest since Dec. 1.
Industry players were divided on whether the price slide would continue or be short lived, given producers’ adherence to a pledge to rein in output and prop up prices that have languished for over two years owing to a glut.
“The high level of uncertainty that has kept the oil complex trading in a relatively narrow trading range since late last year has been replaced, at least for the moment, by a bearish market sentiment,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“The discussion will now center around whether or not Saudi Arabia is willing to give back market share to U.S. producers … or are they ready for yet another round of the market share war.”
So far, there has been no indication that Saudi and OPEC would extend the cuts beyond what is announced or allow the U.S. to claw some of its market share.
Suhail bin Mohammed al-Mazrouei, energy minister for the United Arab Emirates, told Reuters on the sidelines of an industry conference in Houston that the plunge in oil prices was temporary and prices would rise as OPEC complies with output cuts.
Still, the rise in inventories was “a worry,” he admitted.
Despite record exports in U.S. crude oil, inventories have ballooned to a new high week after week, threatening a speedy rebalancing of the market.
Saudi Oil Minister Khalid al-Falih even admitted on Tuesday inventory drawdowns were taking longer than he had expected for the first two months of the year.
The crash Wednesday also tested key technical levels of support established this year and dropped below their 100-day moving averages — a key metric for chart watchers — for the first time since the OPEC deal was announced.
“The move down is in oversold territory, but otherwise, there is very little evidence that it will end,” Dean Rogers, senior analyst at Kase & Company, said of WTI.
A small upward correction might take place first, but odds strongly favor a continued decline toward the next major target at $48, he said, adding that for Brent, the move lower is poised to continue to at least $52.60 and likely $51.60 and lower over the next few days.
Still, for the long term, most market participants continue to remain bullish.
Trade in options — that give the holder the right to buy or sell at a specific price — signaled that the market does not expect prices to move much lower than current levels.
“Their [OPEC’s] response may very well be a continuation of cooperation to limit their oil production, perhaps for a little longer than they had hoped and this should help keep a floor under oil prices,” said Fawad Razaqzada, technical analyst at forex.com.
“Indeed, despite today’s sharp selloff, I remain bullish on oil and still expect to see $60-$70 a barrel by the year end.”
The price of U.S. crude oil has dipped below $50 for the first time since December as a global supply glut persists despite production cuts by big exporters.
In November, the Organization of Petroleum Exporting Countries and other oil-producing nations agreed to lower their output for much of 2017 to rein in chronic oversupply and to boost prices. But drilling and stockpiles of oil have continued to rise, particularly in the U.S.
West Texas Intermediate (WTI) oil, the U.S. benchmark, fell $1.23 a barrel to $49.05 on Thursday, and is down 9% in March.
Brent crude oil, the benchmark for international oils, declined 54 cents a barrel to $52.57.
U.S. commercial crude supplies have risen for nine straight weeks, reaching a record 528.4 million barrels last week, according to the U.S. Energy Information Administration. That was an increase of 8.2 million barrels from a week earlier.
“The rising crude inventory levels in the US to new all-time highs has been the No. 1 reason why prices have been unable to move further higher,” Fawad Razaqzada, market analyst at Forex.com, wrote to investors Wednesday.
The effects of lower oil prices have reverberated through the economy. Prices at the gas pump have fallen since early January, putting more money into drivers’ pockets. The average U.S.gas price peaked this year at $2.38 on Jan. 8, but has since fallen to $2.30, according to GasBuddy.com.
As the weather warms up and more Americans hit the road for spring break and summer, prices typically rise about 60 cents a gallon from mid-February to June 1, says Patrick DeHaan, senior petroleum analyst at GasBuddy. “This year, if (the oil price) drop sticks around, we could see far less of a rally. It could be even half of that,” he said.
That same drop, however, has caused pain in other areas. Shares of oil companies have sagged in recent weeks as analysts’ cut their earnings predictions for the industry. The S&P 500 Energy Index is down 8.5% for the year. ExxonMobil’s stock opened at a 52-week low Thursday, though it rebounded later and finished up 0.8% for the day.
So far, any signs that domestic stockpiles and production could wane have been faint. The Trump administration has been vocal about its desire to remove regulations that hinder U.S. production. And that “could see a surge of domestic crude driving down prices even further,” said Alfonso Esparza, market analyst at brokerage firm OANDA.
U.S. oil output is expected to increase to an average of 9.7 million barrels per day in 2018, with more production in the Permian shale region of Texas and New Mexico, as well as the Gulf of Mexico, expected, according to the U.S. Energy Information Administration.
“U.S. crude oil production is now expected to reach an all-time high in 2018,” Howard Gruenspecht, acting administrator of the E.I.A., wrote in the agency’s March 2017 Short-Term Energy Outlook. “Rising crude oil production from non-OPEC countries, especially from the United States, is expected to curb upward pressure on oil prices for much of 2017.”
Despite the sell-off Thursday, Razaqzada, the analyst at Forex.com, said he expected oil prices to rebound to the $60 to $70 range by the end of the year.
Demand typically rises in the summer, and some analysts expect the effects of OPEC-led supply cuts, which went into effect Jan. 1, to become more noticeable later this year.
Oil is on track to break through the key psychological level of $50 a barrel after a ninth straight rise in U.S. crude stockpiles came at exactly the wrong moment, analysts said Wednesday.
The amount of crude oil in U.S. storage rose to another record high on Wednesday, jumping 8.2 million barrels from the previous week, the Energy Information Administration reported. The increase was more than four times what analysts expected.
Weekly figures also showed U.S. oil production continuing to tick up toward 9.1 million barrels a day, the highest level in more than a year. That provided further evidence that rising American output is confounding efforts by the Organization of the Petroleum Exporting Countries, Russia and 10 other exporters to reduce global oil inventories by curbing their own output.
“It’s really been like a kettle boiling for the last few weeks in terms of having traded in a very tight range. There’s been this pressure building from a technical perspective.”-Matt Smith, director of commodity research, ClipperData
The data sent U.S. benchmark West Texas Intermediate crude prices plunging more than 5 percent to a nearly three-month low.
The plunge through a number of lows on Wednesday puts oil on a path to test the December low of $49.95 a barrel, said John Kilduff, founding partner at energy hedge fund Again Capital.
“From there you could accelerate,” he told CNBC, adding that $50 “was the fail-safe.” Kilduff’s downside target, once oil breaks below $50 a barrel, is $42.
For the last three months, oil has traded in a range between $49.61 and $55.24.
According to Kilduff, all the elements are in place for oil to break below its three-month range: lack of cohesion among OPEC members, bearish statements from oil ministers at CERAWeek conference by IHS Markit and subdued refinery activity as operators perform seasonal maintenance in the United States.
Bearish OPEC comments at CERAWeek
On Tuesday, Saudi Oil Minister Khalid al-Falih warned at CERAWeek that the kingdom would only support OPEC’s intervention in markets for a “restricted period of time” and would not “underwrite the investments of others at our own expense and long-term interests.”
“The Saudis almost explicitly warned that if we don’t get cooperation or we see cheating we’re not going to be someone’s patsy forever,” said Tom Kloza, global head of energy analysis at Oil Price Information Service.
Saudi Arabia has so far provided the lion’s share of output cuts as OPEC and other producers seek to remove 1.8 million barrels from the market in the first six months of 2016. Iraq, OPEC’s second largest producer, produced above its quota in January.
Saudi energy minister: We have been bearing a significant part of the load of OPEC cut
Also at CERAWeek on Tuesday, Iraqi Minister of Oil Jabbar Ali Al-Luiebi said Baghdad could increase its output capacity to 5 million barrels a day by the second half of 2017, raising concerns about its commitments to production cuts.
Andy Lipow, president of Lipow Oil Associates, said $50 can now be considered a target. If oil prices break that level, market watchers can expect more talk from oil ministers about extending the OPEC agreement another six months when producers meet in May, he added.
“I think that OPEC is hoping they can wait it out so they don’t have to make a decision in May to continue with production cuts, but they may be forced into that decision given the high inventories here in the U.S.,” he said.
Those inventory builds are likely to continue through the refinery maintenance season, according to Lipow.
Kettle finally boils over
Further fueling the fall to $50 a barrel is the record number of bets traders have recently made on crude rising further, said Matt Smith, director of commodity research at shipment tracking firm ClipperData. As oil prices fall to the bottom of their range, more traders will look to unwind those positions, he explained.
“It’s really been like a kettle boiling for the last few weeks in terms of having traded in a very tight range. There’s been this pressure building form a technical perspective,” he said. “As that happens, as that pressure builds, we tend to pop violently.”
OPEC secretary general on production cuts
Kloza also sees the anniversary of crude oil storage leases playing into the problem.
Many traders took out one-year leases around this time in 2016, when crude prices were near the lows of the downturn, he explained. Now that the oil price curve is flattening — meaning prices for future crude deliveries are declining relative to current costs — traders have little incentive to sign another one-year lease. Instead they’re selling that oil into an oversupplied market.
While the next 30 days provide an environment ripe for a drop below $50 a barrel, Kloza said, he doesn’t see an “apocalyptic move lower.”
“We may break below that range for about 90 days, but in the end I think we’ll be above it come driving season,” he said. “From now through let’s say May, it may be stormy times,” he said.
Crude oil prices continue to trade off of yearly highs, but have failed to breakout significantly for the 2017 trading year. As such, traders continue to wait for a market catalyst to cause the commodity to breach key values of either support or resistance. Key news for this week includes the release of US employment data this Friday. Expectations for US NFP (Feb) is set at +190k, while the US Unemployment Rate is set to be released at 4.7%.
Technically the price of crude oil remains in an ongoing daily trading range, which is depicted below. Current daily resistance remains located at the January 3rd 2017 peak at $55.67. Alternatively, crude oil prices remain supported above the January 10th low at $51.34. As prices continue to ping between these values, traders may continue to reference these points for a potential market breakout.
Monday’s trading has prices in the middle of this $4.33 range. Currently short term momentum is pointed lower, with the price of crude remaining under the 10 Day EMA found at $53.63. If prices continue to decline this week, traders may look for crude oil to return to support and potentially breakout lower. In the event of a bearish breakout, traders may use a 1x extension of this range to find preliminary pricing targets near $47.01. Alternatively if prices remain supported, traders may look for crude oil to bounce and retest resistance at the standing 2017 high. In this scenario, bullish breakout targets for crude oil may be identified near $60.00.
In the event that prices fail breakout, traders may elect to trade the continuing range or look for opportunities elsewhere.
An oil pump jack in the oil town of Gonzales, Texas.
U.S. crude oil seems to be going nowhere but the weekly New York mercantile Exchange l chart for West Texas Intermediate tells a different story. The chart shows consistent bullish behaviour even though price has developed a temporary resistance level near $54. The sideways movement that has been in place since 2017 January has lulled some observers into a false sense of security when it comes to the potential for further increases in the oil price.
The weekly NYMEX Oil chart shows a long term inverted head and shoulder reversal pattern. This trend reversal pattern is reliable and has a high probability of reaching the projected price breakout targets.
This is a long-term trend reversal pattern that started in mid-2015 and which was confirmed towards the end of 2016. It is best seen on the weekly price chart.
The head and shoulders are shown with the curved lines. The sustained sideways move above $50 in the current uptrend confirms the inverted head and shoulder pattern and the continuation of the slow uptrend.
The depth of the head and shoulder pattern between the neckline and the head is measured and the value projected upwards. This gives a long term upside target near $68. This target is verified using the second chart feature that sets the character of the NYMEX oil chart.
The second feature is the historical pattern of support and resistance levels. The rebound from support near $48 is part of this pattern behavior. Resistance is near $58. A breakout above this level gives a medium term target near $68.
The historical resistance level near $58 is the most significant resistance level for any trend change. The level was broken in 2015 June but the breakout was overwhelmed by the wide separation in the long term Guppy Multiple Moving Average. This is not the situation today. Now the long term GMMA is acting as a support level and the move towards $58 is slow and steady.
The long term GMMA provides an indication of the way investors are thinking. The steady separation of the long term group of averages shows confident support for the new uptrend.
The short term group of averages provides an indication of the way traders are thinking. The consistent steady separation confirms strong confidence in the trend strength. Any pullback in price is taken as a buying opportunity. This is shown by the lack of compression in the short term GMMA when prices pull back.
The successful breakout above $48 is moving slowly to the historical resistance level near $58. This offers short term trading opportunities which can be exploited using the ANTSSYS method to trade the consolidation behavior. The breakout above $58 has a resistance target near $68 and this helps validate the head and shoulder price projection target.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.
That figure tops the former record of 512.095 million barrels for the week ended April 29, 2016.
“The continued growth in the stocks of crude is due to higher production in U.S. shale plays and imports that exceed the volume needed by refiners,” said James Williams, energy economist at WTRG Economics.
“We have enough petroleum inventory to cover close to 70 days of consumption, when the historical norm is well below 60 [days],” he said. The Organization of the Petroleum Exporting Countries is “trying to reduce it, but the effect of [its] efforts are not showing up in the U.S.”
MarketWatch asked several analysts how stockpiles managed to reach an all-time high, even as domestic crude production currently stands at 8.977 million barrels a day—below the record peak output of 9.61 million last seen during the week ended June 5, 2015.
Here are the reasons they came up with (in unranked order):
• Strong imports: “The real driving force has been the surge in imports,” said Troy Vincent, oil analyst at ClipperData.
‘The real driving force has been the surge in imports.’
The EIA on Wednesday report that crude imports for last week averaged 8.5 million barrels, down 881,000 barrels a day from a week earlier. However, over the last four weeks, they have climbed 9.9% vs. the same period a year earlier.
Matt Smith, director of commodity research at ClipperData, said that the U.S. saw nearly 10% more waterborne imports in 2016 than the year before.
“Bargain-basement prices for foreign oil in the last year have been too difficult for U.S. refiners to ignore,” he said. “We will likely see this trend ebb in the months ahead, as OPEC imports fall off—yet U.S. production is rising again to plug the gap.”
• OPEC: “Keep in mind the OPEC cut isn’t really fully felt inside the USA just yet,” said Nico Pantelis, head of research at Secular Investor.
But the “transit time between the countries where the USA is importing a large part of its oil from is several weeks, so cargoes arriving from the Middle East are still geared towards a full production rate in Saudi Arabia,” said Pantelis, noting that 11% of U.S. imported oil comes from Saudi Arabia.
The market will see lower import numbers materializing in the next few weeks, he added.
• Reduced refinery runs: U.S. crude-oil refinery inputs averaged about 15.5 million barrels a day last week—that’s 435,000 barrels per day less than the previous week and down about 390,000 barrels from the year-ago level, according to the EIA.
Refinery utilization stood at 85.4% of capacity, down from 87.7% a week earlier and 88.3% a year earlier, data showed.
That means there’s less crude headed to, and being processed at, the refineries.
• U.S. production: Charles Perry, chief executive officer of energy-consulting firm Perry Management, summed this up well: “the rise in [crude] inventories is due to increase in domestic drilling driven by good economics for domestic production.”
Weekly U.S. crude-oil production at just under 9 million barrels a day has a ways to go before reaching any records, but domestic output has generally been climbing since the second half of 2016 as oil prices for West Texas Intermediate CLH7, -0.19% and Brent crude LCOJ7, -0.13% climbed to levels they hadn’t seen in more than a year.
The EIA has estimated that more than half of U.S. production comes from shale oil.
A monthly report from the government agency released Monday showed expectations for a month-on-month increase of 80,000 barrels a day in March shale oil production.
And oil-rig count data from Baker Hughes BHI, +0.00% point to even more output gains ahead.
• Rise in oil company spending: “Several North American oil producers have increased their [capital expenditure] budgets in the final quarter of last year, and this resulted in a corresponding production increase, which is boosting the inventory levels,” said Pantelis.
Exxon Mobil Corp. XOM, +0.41% announced in late January that it plans to spend $22 billion this year, 14% higher than the amount it spent in 2016.
• Demand slowdown: S&P Global Platts estimated Chinese oil demand growth of 1.3% in 2016 to 11.35 million barrels a day, but that was down from 6.6% growth in 2015, when price declines boosted demand.
Reuters calculated Chinese oil demand growth of 2.5% in 2016, based on official data—a three-year low—down from 3.1% in 2015.
“Two years of OPEC overproduction to defend market share and the introduction of 4.5 million barrels [from 2007-08 levels] of incremental U.S. [lower 48 states] production that transpired concurrently with a slowdown in the rate of China oil demand as well as OECD oil demand, brought us to current record inventory levels,” said Chris Kettenmann, chief energy strategist at Macro Risk Advisors.
Oil prices slide after API reports 14.2 million barrel US crude stockpile increase; gasoline stocks also rise
Crude plunges off strong dollar
Oil prices extended losses on Tuesday after an industry group reported a far larger rise in weekly U.S. crude stockpiles than anticipated.
U.S. crude oil in storage rose by 14.2 million barrels last week, according to the American Petroleum Institute. That was more than five times analysts’ forecasts for a 2.5-million barrel increase.
Gasoline stocks rose by 2.9 million barrels, compared with analysts’ expectations in a Reuters poll for a 1.1-million barrel gain.
U.S. crude was trading at $51.72 after ending Tuesday’s trade down 84 cents, or 1.6 percent, at $52.17.
Benchmark Brent crude was down $1.03, or 1.9 percent, to $54.69 a barrel by 4:50 p.m. (2150 GMT).
Concerns that U.S. gasoline consumption is stalling weighed on futures. U.S. gasoline prices fell 2.3 percent.
Commodities tomorrow: Strong support for oil at $53
Futures were pressured on Tuesday by sluggish demand and evidence of a burgeoning revival in U.S. shale production that could complicate efforts by OPEC and other producers to reduce a supply glut.
Gasoline stockpiles rose by almost 21 million barrels in the first 27 days of 2017, compared with an average increase of less than 12 million barrels at the same time of year during the previous decade, according to official inventory data.
“It’s a supply-driven setback … We are within 2 million barrels of the record in U.S. gasoline stocks that we saw last February,” said Tony Headrick, energy markets analyst at CHS Hedging. “A strong build in inventory reports could weigh on gasoline in a seasonal timeframe where gasoline demand is weak.”
Inventory estimates from trade group the American Petroleum Institute are due on Tuesday afternoon. U.S. government data is reported Wednesday.
Gasoline futures fell below the 200 day moving average on a continuous chart, Headrick noted.
The U.S. dollar rose 0.4 percent against a basket of currencies, making dollar-denominated commodities like crude oil more expensive to holders of other currencies.
Prices have been supported for two months as the Organization of the Petroleum Exporting Countries and other exporters have tried to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017. OPEC and Russia have together cut at least 1.1 million bpd so far.
Another bullish sign emerged on Tuesday as crude oil exports from southern Iraq fell in January to 3.275 million barrels per day (bpd) from 3.51 million bpd in December, according to two oil executives.
Iraq, OPEC’s second largest producer, has been a concern among analysts because it has a harder time managing output than some other cartel members. Its leaders also raised issues with the coordinated production cuts from their inception.
‘Encouraging’ signs OPEC production has been cut back: IEA
But market players are concerned that rising U.S. production and signs of slowing demand growth could offset these efforts.
“The general perception is that OPEC is cutting production, which is supporting prices, but high stock levels, rising rig counts and growing U.S. production are capping gains,” said Tamas Varga, analyst at London brokerage PVM Oil Associates.
Societe Generale oil analyst Michael Wittner said U.S. shale oil output was recovering faster than expected.
“Rig counts are increasing at an accelerating pace, and given the technological advances of the past three years, this should translate into significant supply,” Wittner said.
“U.S. shale is coming back, and it’s coming back strong.”
U.S. oil production is expected to rise 100,000 barrels per day to 8.98 million barrels in 2017, 0.3 percent less than previously forecast, according to a monthly U.S. government report released on Tuesday.
Chinese oil demand grew in 2016 at the slowest pace in at least three years, Reuters calculations showed, the latest sign of slower demand from the world’s largest energy consumer.
Correction: This story has been corrected to reflect the total stockpile build reported by API was 14.2 million barrels.
— CNBC’s Tom DiChristopher contributed to this report.