AUGUST 4, 2017 – Oil is back down again this week following the year’s biggest rally as investor focus shifted to rising output from the U.S. and OPEC, and away from a seasonal increase in American fuel demand.
Futures in New York were down 2.2 percent for the week after an 8.6 percent surge in the prior period. While U.S. government data on Wednesday showed crude stockpiles continued to decline, production expanded to the highest level since July 2015. Output from the Organization of Petroleum Exporting Countries last month climbed to the highest level this year, driven by a gain in supplies from Libya, a Bloomberg survey showed.
The output increase is raising concern that a market glut will persist and weigh on prices, which have slipped after settling above $50 a barrel earlier this week for the first time since May. Last week’s rally was driven by shrinking stockpiles in the U.S., where fuel demand is peaking amid the summer driving season that is due to end next month. Oil trader Andy Hall is closing down his main hedge fund after big losses in the first half, according to people with knowledge of the matter.
“U.S. driving season will be over after the September holiday so if production is increasing, oil stocks will take longer to come down,” said Michael Hewson, a market analyst at CMC Markets in London. “While we’ve seen five successive weekly draws, that is only making moderate dent in stockpiles.”
West Texas Intermediate for September delivery was at $48.53 a barrel on the New York Mercantile Exchange, down 50 cents, at 11:38 a.m. in London. Total volume traded was about 6.8 percent above the 100-day average. Prices lost 56 cents, or 1.1 percent, to $49.03 on Thursday.
Brent for October settlement was 52 cents lower at $51.49 a barrel on the London-based ICE Futures Europe exchange. The contract slid 35 cents, or 0.7 percent, to $52.01 on Thursday. Prices are down 2 percent this week after a 9.3 percent surge in period ended July 28. The global benchmark crude traded at a premium of $2.79 to October WTI.
U.S. oil output expanded by 20,000 barrels a day to 9.43 million a day, according to a report from the EIA. While crude stockpiles have declined the past five weeks during strong seasonal demand, inventories are still about 95 million barrels above the five-year average.