Oil futures settled lower on Wednesday, with U.S. prices marking their lowest settlement in about 10 weeks after U.S. government data revealed an unexpected increase in weekly crude supplies.
Indications that the Organization of the Petroleum Exporting Countries, or OPEC, continued to ramp up production in June also pressured prices. August crude fell $2.51, or 4.2%, to settle at $56.96 a barrel on the New York Mercantile Exchange. Prices, based on the most-active contracts, haven’t closed at a level that low since April 22. August Brent crude also declined by $1.58, or 2.5%, to $62.01 a barrel on the ICE Futures exchange.
Early Wednesday, the U.S. Energy Information Administration reported an unexpected increase of 2.4 million barrels in crude supplies for the week ended June 26. Analysts polled by Platts forecast a crude-stock fall of 1.3 million barrels, while the American Petroleum Institute late Tuesday reported a rise of 1.9 million barrels. “The build was unexpected, showing we are still very well supplied,” said Tariq Zahir, a managing member at Tyche Capital Advisors. In terms of trading levels, $58 is the “new resistance” price for Nymex oil, he said. Between now and July 6, the day before Iran deal is supposed to be completed, Zahir said he’s “shorting any rally…and close above $58.” An Iran deal “could add to worldwide supplies as we get to the end of the year,” he said. The deadline for an agreement between Iran and the West over Iran’s nuclear program was extended to July 7.
Gasoline supplies fell by 1.8 million barrels and distillate stockpiles rose by 400,000 barrels last week, according to the EIA. Analysts polled by Platts were looking for an increase of 300,000 barrels for gasoline and a climb of 1.1 million barrels for distillates, which include heating oil.
Meanwhile, recent Reuters and Bloomberg surveys showed OPEC significantly scaled up oil production in June. “OPEC is producing well in excess of its own target of 30 million barrels a day. Iraq and Saudi Arabia in particular were responsible for the expansion of supply, both countries having stepped up their output to a record level. The oversupply on the oil market thus remains considerable,” analysts at Commerzbank said.