Crude-oil futures finished lower Thursday after a U.S. government report revealed that domestic supplies climbed for a fifth straight week as production jumped to a record level, but overall signs of declines in world-wide output capped price losses for the session.
Oil prices for both benchmarks on Wednesday had marked their highest settlements since November on signs of tighter global crude inventories.
April West Texas Intermediate crude CLJ9, -0.23% on its first full day as a front-month contract, lost 20 cents, or 0.4%, to settle at $56.96 a barrel. March WTI US:CLH9 had climbed for six consecutive sessions on the New York Mercantile Exchange to settle at a roughly three-month high of $56.92 on Wednesday, the day the contract expired.
Global benchmark April Brent LCOJ9, -0.25% was little changed, inching lower by a penny to end at $67.07 a barrel on ICE Futures Europe.
The Energy Information Administration on Thursday reported that domestic crude supplies rose a fifth straight week, up 3.7 million barrels for the week ended Feb. 15. That was a bit more than the 3.5 million-barrel rise expected by analysts polled by S&P Global Platts. Supply data were released a day later than usual because of Monday’s Presidents Day holiday.
The American Petroleum Institute data on Wednesday showed an increase of 1.3 million barrels.
“Rebounding imports, both into the Midwest and the U.S. Gulf, have combined with ongoing subdued refinery runs to yield a fifth consecutive build to crude stocks,” said Matt Smith, director of commodity research at ClipperData.
U.S. oil production also continues to hit record levels, with the EIA’s report showing total domestic output climbing by 100,000 barrels to a record of 12 million barrels a day last week. A separate monthly EIA report issued Tuesday showed expectations for an 84,000 barrel-a-day rise in March to 8.398 million barrels a day for oil production from seven major U.S. shale plays.
“U.S. production finally hit the 12 [million barrel per day] mark and we expect that number to increase in the weeks and months to come as new pipelines in the Permian [Basin in the southwestern U.S.] are coming online,” said Tariq Zahir, managing member at Tyche Capital Advisors.
Petroleum products, meanwhile, saw lower U.S. inventories. Gasoline and distillate stockpiles each edged down by 1.5 million barrels last week, according to the EIA. The S&P Global Platts survey had shown expectations for supply declines of 1.1 million barrels for gasoline and 1.4 million for distillates.
On Nymex, March gasoline RBH9, -0.35% rose 1.6 cents, or 1%, to $1.614 a gallon, while March heating oil HOH9, -0.31% added 1.8 cents, or 0.9%, to $2.036 a gallon.
The EIA also released data on natural gas Thursday, with supplies down 177 billion cubic feet for the week ended Feb. 15. That was larger the average forecast for a decline of 165 billion, according to a survey of analysts by S&P Global Platts.
March natural gas NGH19, -0.33% settled at $2.697 per million British thermal units, up 6.1 cents, or 2.3%.
Taking a look at the bigger picture, oil prices remain higher for the week to date, boosted by growing optimism that the U.S. and China could strike a trade deal. Negotiators have begun to outline a deal to end the trade war between the world’s two largest economies, Reuters reported Wednesday night. That news initially helped push stocks and other assets viewed as risky to the upside.
Still, “with economic numbers out of Europe and China and now the U.S. showing weakness if a [trade] deal isn’t reached and tariffs increase, we could see weakness across all asset classes and demand for crude come down,” said Zahir.
If Saudi Arabia “does not continue to cut production offsetting U.S. production and the tariffs increased, we could see a glut start to form in the spring,” he added.
In the background, there continues to be evidence of shrinking global supply because of OPEC-led production cuts. OPEC and 10 partner producers outside the cartel, led by Russia, agreed late last year to hold back crude output by a collective 1.2 million barrels a day for the first half of this year in an effort to rebalance an oversupplied market and boost prices. OPEC production has also been declining as a result of U.S. sanctions on the oil industries of cartel members Iran and Venezuela, both of which were exempted from the latest production-cut deal.