Oil slips near $63 as risks counter reported United States inventory draw

Frederick Owens
February 9, 2018

At the time of writing, Brent crude oil prices were down 1.22 per cent at $64.71 a barrel while West Texas Intermediate, the U.S. benchmark, was down 1.59 per cent at $60.81 a barrel. "Monthly average Brent prices have increased for seven consecutive months", EIA said.

West Texas Intermediate crude oil fell to $61.90, down 0.56 per cent.

Crude oil futures fell sharply Wednesday, extending a recent slump after data showed USA oil inventories dropped for a second week in a row.

But in one of the steepest rises of any oil producer in modern history, US output has surged by more than 20 percent since mid-2016, undermining OPEC's and Russia's efforts to tighten the market and prop up prices by withholding production.

Last week, the US Energy Information Administration (EIA) reported the tenth straight weekly drop in USA stockpiles of crude oil.

Oil slips near $63 as risks counter reported United States inventory draw

Crude volatility continued higher, with the Cboe/Nymex Oil Volatility Index rising 6.2% on Tuesday after its biggest one-day gain since December at the start of this week. Oil production in the US for the week, according to the department, also increased - by 3.3 percent, or by 332,000 barrels per day, to 10.251 million barrels per day.

But while USA share prices continued to rally after a late afternoon rebound on Tuesday, oil prices extended losses after the weekly inventory report. This could offset the Opec production cuts to a large extent and keep oil prices capped at higher levels. The country's import dependence is also expected to grow as imports rise and production at home declines. USA futures were down 15 cents at $61.64 a barrel.

In 2017, 56% of China's crude oil imports came from countries within the Organization of the Petroleum Exporting Countries (OPEC), a decline from the peak of 67% in 2012.

Now investors are expecting the publication of data from the U.S. Energy Department.

In a statement to CNBC, an official said: "We're always concerned when the market loses any value, but we're also confident in the economy's fundamentals". "Morgan Stanley falls in the middle, predicting that Brent will occasionally touch $70-75 in the first half of this year, stabilizing around $75 a barrel in the third quarter", according to OilPrice.com. While shale producers in the U.S. essentially require oil prices to remain at around the $50-per-barrel region to cover their production costs and the high-yield bonds used for financing, OPEC will do all it can to ensure that oil prices are tightly balanced, thereby discouraging additional entrants into the market, as they have already seen their market share dwindle in the wake of U.S. crude-oil producers.

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