Crude oil futures tumble after bearish EIA inventory data

Both West Texas Intermediate and Brent crude fell during Wednesdays shortened trading session as the Energy Information Administration reported that US crude oil inventories bulked up by the most in two months, exacerbating a global supply glut picture.

US crude for delivery in February fell 2.24% yesterday to settle at $55.84 per barrel, having shifted in a daily range of $57.15-$55.07. Prices are down 43% this year.

Meanwhile on the ICE, Brent for settlement in the same month fell 2.35% to $60.24 a barrel after holding within daily boundaries of $61.71-$59.37. The contract settled at a premium of $4.40 to its US counterpart, compared to $4.57 a day earlier, and is down 46% so far this year.

The Energy Information Administration reported on Wednesday that US crude inventories surged by 7.267 million barrels to 387.2 million in the week ended December 19th, the highest since June. Analysts had projected a withdrawal of 2.280 million barrels. Supplies at the Cushing, Oklahoma hub jumped to 28.8 million barrels from 27.8 a week earlier, reaching the highest since March.

US crude output eased to 9.127 million barrels per day from 9.137 million the previous week, which was the highest for recorded weekly data spanning to January 1983. However, imports surged to 8.292 million bpd, the most since September 2013, from 7.104 million a week earlier. The four-week average of imports rose to 7.592 million bpd and was 1.4% above year-ago levels.

Refineries operated at 93.5% of their operable capacity, unchanged from the preceding period. Gasoline production rose to a record of 9.92 million barrels per day, while distillate fuel output gained slightly to 5.2 million bpd.

Total motor gasoline inventories jumped by 4.083 million barrels to 226.1 million, the highest for this time of the year in weekly data spanning back to 1990, underperforming projections for a 0.6-million-barrel gain. Distillate fuel stockpiles, which include diesel and heating oil, rose by 2.303 million barrels to 123.8 million, the highest in nine weeks, defying analysts projections for a decline of 0.9 million barrels.

Tim Evans, an energy analyst at Citi Futures Perspective in New York said yesterday for Bloomberg: “This report provides us with a very consistent picture that weve got supply outpacing demand and inventories are piling up. There’s too much crude coming in. Refineries are operating at a high rate but not high enough to make a dent in this.”

The bearish supply data offset previous support lent by better-than-expected economic growth and consumer sentiment numbers from the US which had painted a brighter demand picture.

Commerce Department numbers showed earlier in the week that the US economy expanded by an annualized 5.0% in the third quarter, blowing past expectations for 4.3% growth.

A separate report showed that December consumer sentiment surged to a pre-recession high, with the corresponding Thomson Reuters/University of Michigan index jumping to 93.6 from 88.8 in November. Personal income rose by 0.4% in November on a monthly basis, compared to 0.3% in October, while personal spending increased by 0.6%.

OPEC determination

Saad Al-Hadithi, a spokesman for the Iraqi prime minister’s office, said that Iraq approved a budget of 123 trillion dinars ($103 billion) for 2015, compared to previous plans of 141 trillion dinars. The spending plan was based on oil prices of $60 per barrel and reflected the second-biggest OPEC producers adjustment to the markets current state and the countrys willingness to defend its market share.

Iraqi Oil Minister Adel Abdul Mahdi said earlier in the week that his country plans to raise production to 4 million barrels per day next year and that the group’s November 27 decision to maintain output was part of an effort to retain market share. Prices have fallen some 20% since the Vienna meeting.

Saudi Arabian Oil Minister Ali Al-Naimi told the Middle East Economic Survey on Monday that the kingdom doesnt plan to scale back production regardless of the prices reached. “Whether it goes down to $20, $40, $50, $60, it is irrelevant,” he was cited.

On Sunday, Al-Naimi said that the global supply glut that recently drove oil prices to the lowest in 5-1/2 years was created by the lack of cooperation from non-OPEC producers. The group will probably refrain from cutting output, even if non-member producers offer to pump less, Al-Naimi said, and expressed confidence that oil will rebound as reviving global economic growth will spur demand.

UAE Energy Minister Suhail Al Mazrouei said on Sunday that “irresponsible” production from outside OPEC is behind the fall in prices. “We call on all other producers to stop the increase” he said.