Oil dips on forecast for rising stockpiles, Trump trade-war risk

Javier Howell
March 9, 2018

The EIA said weekly United States crude production hit a record high per day last week of nearly 10.4 million barrels.

The U.S. Energy Informational Administration released its short-term forecast Tuesday, forecasting Brent spot prices will average about $62 barrel in 2018 and 2019 compared with an average of $54 per barrel in 2017.

In a monthly report last week, the EIA said USA oil output rose to 10.057 million bpd in November, a revision from earlier estimates, the EIA said.

Oil prices steadied today, supported by healthy demand, after falling the previous day under pressure from record USA crude production and rising inventories.

Oil prices were broadly steady on Thursday but still set to slip over the week for the second time in a row against a backdrop of rising USA crude production and an increase in inventories.

West Texas Intermediate (WTI) crude futures fell $US1.81 to $US60.79 a barrel, a 2.9 per cent loss, in afternoon trade. The report's out a day after the S&P 500 futures dropped 1 percent on the news that President Trump's advisor Gary Cohn had handed in his resignation - a move seen widely as fueling further worry about a possible global trade war if the United States approves Trump's proposal for a 25-percent import tariff on steel and a 10-percent levy on aluminum.

Brent crude futures were at US$64.36 per barrel at 0758 GMT, up 2 cents, or 0.03 per cent, from their previous close.

The prospect of the Organization of the Petroleum Exporting Countries and non-member producers, including Russian Federation, maintaining crude output cuts in the face of a boom in USA shale production helped lift Brent back above $65 a barrel this week.

Major powers, including the European Union and China, have said such tariffs could lead to retaliatory action and trigger a global trade war. Last week's API report showed a build in gasoline inventories of 1.914 million barrels. Traders are responding to White House comments saying Canada and Mexico, and possibly other countries, may be exempted from planned USA import tariffs on steel and aluminum.

The spread between the two benchmarks blew out to $7.07 a barrel in late September in the aftermath of Hurricane Harvey, which knocked out refineries along the U.S. Gulf Coast, cutting demand for WTI crudes.

Nevertheless, the US stands to dominate global oil markets for years to come, satisfying 80 percent of global demand growth to 2020, the International Energy Agency said Monday.

Other reports by Insurance News

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