Oil prices dip on bloated U.S. market, mixed Saudi signals

Andrew Cummings
April 21, 2017

"The fact that gasoline stocks rose... anxious traders that demand is not as strong as many thought", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

May West Texas Intermediate crude CLK7, -3.95% lost 15 cents, or 0.3%, at $52.26 a barrel on the New York Mercantile Exchange. The contract, which finished at its lowest level since April 7 on Tuesday, is set to expire at Thursday's settlement.

U.S. crude stocks fell 1 million barrels in the latest week, according to the U.S. Energy Information Administration, less than anticipated.

Data from the American Petroleum Institute (API) on Tuesday showed that US markets remained bloated.

The gasoline inventory rose by 1.4 million barrels as refinery runs increased by 334,000bpd in the US. Distillate stockpiles fell a bit more than expected-down 2 million barrels last week.

Gasoline stocks were up by 1.5 million barrels, compared with expectations in a Reuters poll for a 1.9 million-barrel drop.

"The glaring rise in USA gasoline refined product inventories, in combination with persistent lower-48 production growth, keeps us cautious on oil prices", said Chris Kettenmann, chief energy strategist at Macro Risk Advisors LLC in NY. Weekly imports from OPEC nations rose by 900,000 barrels, the EIA said. Inventories are at record highs.

OPEC plans to meet with non-OPEC oil producers on the same day as its scheduled May 25 conference, sources familiar with the arrangements said, as they decide whether to extend supply cuts into the second half of the year.

A global crude glut has persisted even as the Organization of the Petroleum Exporting Countries and other producing countries have worked to reduce output under an agreement to cut supplies nearly 1.8 million barrels per day in the first half of 2017. Earlier this week, Saudi Arabia's Energy Minister Khalid al-Falih reportedly said it is too early to make a decision on a deal extension. And OPEC, in the wake of its production-freeze agreement late previous year, appears to be once again losing market share - the recapturing of which was the reason the oil sheiks engaged in their price war in 2014 in the first place. "Geopolitical uncertainty is always a threat to inject premium into the market", said Macaluso.

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