WTI extended yesterdays losses as U.S. crude output reached its highest pace since 1990, while the end of the driving season draws closer. Meanwhile, negative China manufacturing data from Wednesday continued to spur concern over demand in the worlds second biggest consumer.
On the New York Mercantile Exchange, WTI crude for September delivery traded at $104.97 a barrel at 7:27 GMT, down 0.40% on the day. Prices ranged between days high and low of $105.42 and $104.73 a barrel respectively. Light, sweet crude fell more than 1.9% yesterday and settled at $105.39, the biggest drop since June 21 and lowest closing prices since July 11. The U.S. benchmark has fallen 3% for the week so far after gaining 14% during the previous four.
Meanwhile on the ICE, Brent oil for September delivery fell below the $107 mark and traded at $106.94 a barrel at 7:28 GMT, down 0.23% on the day. Prices held in range between days high at $107.20 and low of $106.63 per barrel, the lowest since July 5. The European benchmark slipped over 1.1% yesterday, extending this weeks decline to 1.4% after plunging 5.5% the previous one.
Oil prices were pressured yesterday after the EIA released its weekly oil reserves report. It showed that despite gasoline and distillate fuel stockpiles confounded analysts expectations for an increase, crude reserves matched expectations for a 2.8 million barrels drop and did not exceed them like the previous three weeks. Meanwhile, U.S. oil output rose to 7.56 million barrels per day last week, the highest since December 1990, which fueled concern over ample supply as half of the U.S. driving season has already passed.
The Energy Information Administration reported that U.S. Crude Oil Inventories fell by 2.8 million barrels, or 0.8%, during the week ending July 19, matching analysts’ projections. Total crude reserves stood at 364.2 million, the lowest since January. Refineries operated at 92.3% of their operable capacity last week, above projections for 91.9% but below the preceding period’s 92.8%. Gasoline production increased, while distillate fuel output decreased, averaging 9.2 million and 5.0 million barrels per day respectively.
Total U.S. gasoline stockpiles decreased by 1.4 million barrels, or 0.6% and confounded analysts’ expectations for a rise, but remained above the upper limit of the average range. Meanwhile, distillate fuel inventories also refuted projections for a surge and fell by 1.2 million barrels, remaining near the lower limit of the average range.
Stockpiles at Cushing, Oklahoma, the nations biggest storage-hub and delivery point for New York-traded contracts decreased by 2.1 million barrels.
Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania, said for Reuters: “Bottom line, domestic crude production hit the highest high, 7.56 million barrels per day, since 1990, while the end of the summer driving season is now in sight. All in all, it was a bearish report.”
China data
Meanwhile, Chinas negative data that was released on Wednesday still weighed on prices. Both negative and positive data about the state of the Chinese economy have a strong influence on oil pricing as the Asian country accounted for 11% of global consumption in 2012, according to BP Plc’s Statistical Review of World Energy.
Chinas manufacturing sector decelerated to an 11-month low in July according to the flash HSBC/Markit PMI. The index fell to 47.7, compared to June’s final reading of 48.2 and if confirmed in the final report on August 1, it will be the lowest in 11 months. Readings below 50 indicate contraction in the respective sector.
Meanwhile, a sub-index that measures employment fell for a fourth consecutive month below 50 to 47.3 in July, below June’s 47.7 reading and the the weakest since March 2009.
Ken Hasegawa, a commodity sales manager at Newedge Japan, said for Reuters: “There is no supply shortage and it will take time for the global economy to recover. Chinas economic growth will stabilise at lower levels and will no longer be a giant oil demand driver.”