Oil drops on US energy report

By 1630 GMT, US benchmark West Texas Intermediate (WTI) for delivery in October had fallen 87 cents to $44.03 a barrel, reversing earlier gains. Brent North Sea crude for November delivery lost 91 cents to $46.19 a barrel compared with the previous day’s close. The US government’s Department of Energy (DoE) reported Wednesday that commercial crude inventories fell about 600,000 barrels in the week to September 9. That confounded market expectations for a gain of four million barrels, according to analysts polled by Bloomberg News. Falling US crude stockpiles tend to push prices higher because they indicate strengthening demand in top global oil consumer, the United States. However, traders focussed instead on news of rebounding reserves of gasoline, or petrol, and distillates which include diesel and heating fuel. Stockpiles of gasoline grew 600,000 barrels and distillates added a hefty 4.6 million barrels last week, according to the DoE. “The oil report was not as bullish as the headline number may have suggested, so concerns about oversupply remain firmly in place,” City Index oil analyst Fawad Razaqzada told AFP. “Not only did stocks of gasoline and distillates rise sharply, crude production was up for the first time in four weeks, too. “So the devil was in the detail of the report and once traders realised that, they were quick to abandon their bullish positions, causing WTI to drop to $44.” In earlier deals on Wednesday, the oil market had crept higher as traders mulled gloomy supply and demand forecasts which have cast a pall over the market this week. Oil had also edged upwards after US industry body, the American Petroleum Institute (API), reported that US crude reserves had risen by less than expected last week. Hopes for a sustained rebound in demand were dashed this week by fresh warnings a global supply glut would persist for longer than previously thought. As the market eyed a producers’ meeting later this month for some reprieve, the Paris-based International Energy Agency (IEA) forecast a continuing global supply glut in 2017. The organisation reversed its previous projection that stubborn global oversupply would be soaked up by demand in the latter part of 2016. Instead, it warned that the glut — which has sent prices crashing in recent years — would linger “at least through the first half of next year”. The IEA — which advises oil consuming nations on energy issues — added that oil demand growth was slowing while supply was rising. The news followed a report Monday by the Organization of the Petroleum Exporting Countries (OPEC) predicting that non-member countries would see output rise in 2017, revising its previous expectations of a drop. – ‘Major doubts’ over deal – Traders will meanwhile be watching for any deals to freeze or cut output when OPEC and non-OPEC producers meet in Algeria later this month. “There are still major doubts about whether a deal can be done,” IG Markets said in an analysis. “The world’s largest producer, Saudi Arabia, is lukewarm about a freeze, while Iran and Iraq are still increasing output following wars and sanctions and they’re unlikely to support a deal until they’re pumping at full capacity.” The 14-nation OPEC oil exporting group will meet informally in Algeria with non-member producers on the side-lines of the International Energy Forum from September 26 to 28.