By Barani Krishnan
Investing.com - U.S. oil refiners seem to be on a mission to produce like never before and that’s taking the floor out of oil. Crude prices sunk to five-week lows on Wednesday after U.S. government data showed petroleum stockpiles rose by 14 million barrels for a second week in a row.
Adding to the bearish supply theme was U.S. crude production, which finally hit the much-anticipated 13 million barrels per day record high last week, and OPEC’s monthly report anticipating higher global supply going forth.
New York-traded West Texas Intermediate, the benchmark for U.S. crude,settled down 42 cents, or 0.7%, at $57.81 per barrel. It fell to a five-week low of $57.38 earlier.
London-traded Brent , the global crude benchmark, settled down 49 cents, or 0.8%, at $64. Earlier, it touched a five-week low of $63.56. That bottom came just a week after Brent's four-month high of $71.22, struck after Iranian missiles hit U.S.-Iraqi airbases.
Crude pulled back losses as President Donald Trump began speaking ahead of the signing of the U.S.-China phase one deal, where officials announced that Beijing would purchase $200 billion of U.S. goods and services over the next year, including $50 billion for energy. China is the world’s largest buyer of oil and the United States is the largest producer of the commodity.
Oil prices initially slumped after the U.S. Energy Information Administration said crude inventories across the country fell by 2.55 million barrels for the week ended Jan. 10. Analysts were looking for drop of 474,000 barrels.
Gasoline inventories jumped by about 6.7 million barrels, compared with expectations for a build of about 3.4 million barrels, the EIA said.
Distillate stockpiles, meanwhile, soared by about 8.2 million barrels, versus expectations for a rise of about 1.2 million barrels, the agency said. It was the biggest weekly build in distillates since September 2017.
On a net basis, petroleum products, including crude, were up 14.5 million barrels for the week ended Jan. 10. after a 14.2-million rise for the previous week to Jan. 3.
“The crude build announced by the EIA might have much bigger than expected, but the products builds, especially distillates, was truly eye-watering,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors in New York.
The products build came despite refinery runs staying at their recent trend of 92% of capacity amid imports north of 6.5 million barrels, which again wasn’t unusual.
U.S. crude production, meanwhile, hit an all-time high of 13 million barrels per day after staying at around 12.9 million for several weeks.
OPEC, meanwhile, raised its non-OPEC supply growth forecast for 2020 by 180,000 barrels a day to 2.35 million barrels, citing upward revisions to supply in Norway, Mexico, and Guyana.