U.S. oil futures settled at a more than three month low Wednesday, plagued by persistent worries over strong crude production as traders assessed the latest weekly petroleum-supply update and the impact of Iran’s nuclear deal.
On the New York Mercantile Exchange, August West Texas Intermediate crude fell $1.63, or 3.1%, to settle at $51.41 a barrel. Prices marked their lowest settlement since April 9, based on the most-active contracts.
August Brent crude on London’s ICE Futures exchange fell $1.46, or 2.5%, to $57.05 a barrel.
Early Wednesday, the U.S. Energy Information Administration on Wednesday reported a drop of 4.3 million barrels in crude supplies for the week ended July 10. Analysts polled by Platts had forecast a crude-stock fall of 1.8 million barrels, while the American Petroleum Institute on Tuesday said supplies declined by 7.3 million barrels. The report was “somewhat bullish” but now that the dust has settled a bit more following the data, it seems as though traders are “looking at the still elevated level of U.S. production” despite the week over week pullback in U.S. output for the lowest 48 states, said Tyler Richey, co-editor of The 7:00’s Report. Theyre weighing that against record production by Saudi Arabia in June, “leaving the broader economic equation bearish for oil prices as the global glut in oil supply remains,” he said.
The EIA report showed that oil production in the lower 48 states fell by 66,000 barrels for the week to 9.1 million barrels a day, but that is about one million barrels above the year-ago level. Gasoline supplies rose 100,000 barrels, which was roughly within market expectations but stockpiles for distillates, which include heating oil and jet fuel, jumped by 3.8 million barrels last week, according to the EIA. Tim Evans, chief market strategist at Long Leaf Trading Group, said the report shows the “current glut of distillates.”
“The drop in crude-oil stocks simply shows that refiners cut back on crude-oil purchases while they are working off the excess supply of the distillates,” he said. “The crude-oil market is pricing in its bearish outlook, given the poor demand picture and potentially much greater supply coming from Iran.”
On Tuesday, oil prices ended on a positive note after news of the Iran nuclear deal was confirmed. While the deal between Iran and six world powers is bearish for oil prices as it could boost Iranian crude exports and add to the global oil glut, it also clears some of the uncertainty that has been weighing on oil markets in recent days.