14 September 2016, New York — Oil prices fell about 3 percent for a second straight day on Wednesday, after data showing large weekly builds in U.S. petroleum products offset a surprise draw in crude stockpiles.
U.S. inventories of distillates, which include diesel and heating oil, rose by 4.6 million barrels in the week to Sept. 9, the U.S. Energy Information Administration reported. Analysts had expected an increase of 1.5 million barrels. It was the biggest weekly build since January, putting distillates at six-year seasonal highs.
Gasoline stockpiles also rose more than expected, with the EIA reporting an increase of 567,000 barrels versus a forecast 343,000 barrels.
Crude inventories, meanwhile, fell by 559,000 barrels. Analysts had expected a build of 3.8 million barrels.
“A build to gasoline stocks amid lower runs and lower product supplies counters the bullish theme, as does a strong build to distillates,” said Matthew Smith, analyst at New York-based crude cargo tracker Clipperdata.
Brent crude futures settled down $1.25, or 2.7 percent, at $45.85 per barrel.
U.S. West Texas Intermediate (WTI) crude futures slid $1.32 cents, or 2.9 percent, to settle at $43.58.
Many analysts were mystified by the weekly draw in crude, which came after another unexpected decline of 14.5 million barrels from the previous week. That earlier draw, the highest in 15 years, was due to Tropical Storm Hermine delaying oil arrivals into the U.S. Gulf Coast for several days.
“So, the million-dollar question is really a 14.5 million barrel question … as in where did all those barrels go to? The market was expecting some sort of a ‘make up call’ after last week’s storm affected mega-draw,” said David Thompson, executive vice president at commodities-focused broker Powerhouse in Washington.
Some expected more light in forthcoming EIA data. “Next week’s report will be telling, whether last week’s lost barrels finally show up in the petroleum balance sheet,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Oil prices also fell 3 percent on Tuesday, pressured by revised forecasts from the International Energy Agency and the Organization of the Petroleum Exporting Countries that suggested the global crude glut could persist. [IEA/M] [OPEC/M]
OPEC and other oil producers meet in Algeria on Sept. 26-28 to discuss a crude production freeze. Most analysts are skeptical of a deal and think oil prices will head lower.
“The process of shaving an additional $4.50 a barrel off of the crude benchmarks could require another couple of weeks,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.
Distillate futures fell nearly 4 percent, hitting two-week lows as investors worried whether the coming autumn will be cold enough to boost heating oil demand adequately. Gasoline futures settled down 1 percent.
*Barani Krishnan; Ahmad Ghaddar & Mark Tay; Editing – Paul Simao & David Gregorio – Reuters