Oil drops on surprise United States gasoline stock build

Oil drops on surprise United States gasoline stock build

So far in February 2018, USA crude oil production has topped 10 million bpd in each of the three previous weeks, EIA data shows.

This is coming as the International Energy Agency (IEA) has predicted that the United States would overtake Russian Federation as the world's biggest oil producer by 2019 at the latest, as the country's shale oil boom continues to upend global markets.

NEW YORK, Feb 27 (Reuters) - Oil fell on Tuesday as a firmer dollar encouraged investors to take profits from a two-week rally ahead of weekly data that analysts have forecast will show a build in USA crude inventories.

U.S. West Texas Intermediate crude CLc1 fell $1.37, or 2.17 percent, to settle at $61.64 a barrel. That era may be coming to an end now that USA crude oil production hit a 47-year high of 10M b/d at the end of 2017 and is forecast to surpass 11M b/d by the end of 2018, which would make the U.S. one of the largest crude oil producers on the planet. On Tuesday, the contract fell 87 cents to close at $66.63 a barrel.

"We're not so much anxious about inventories, but trying to see how USA domestic production and rig count numbers are coming to week by week", David Lennox, a commodities analyst at Fat Prophets in Sydney, said by phone.

After talks with visiting Saudi oil minister Mr Khalid Al-Falih, Petroleum Minister Mr Dharmendra Pradhan said India is a price sensitive market and so "we must get reasonable price for crude oil and LPG" imported from the OPEC nation. Oil prices, which fell below $30 a barrel in 2016, have since more than doubled to nearly $70 a barrel.

Brent Crude
Daily May Brent Crude

The growing U.S. production is reversing global markets at a time when other major producers, including Russian Federation and the Organization of Petroleum Exporting Countries (OPEC), are shrinking their production to support prices.

Still, OPEC and its allies seem unfazed by USA shale and continue to send messages to the market that they will do "whatever it takes" to balance the oil inventories and that production cuts are here to stay until the end of 2018. And that means even minus 70 thousand barrels of oil on the market.

"It's a mixed market with both bearish and bullish signals", said Hong Sung Ki, a commodity trader at NH Investment & Securities Co.in Seoul. Mind you, the US production now stands at highest level since the early 1970s.

Crude inventories rose by 933,000 barrels in the week to 421.2 million, compared with analyst expectations for an increase of 2.1 million barrels. "As a result, the discount on the Canadian effective price vis-à-vis WTI has risen to over US$20 to date in early 2018, more than double its 2017 average (US$9.61)".

WTI crude oil rose by 0.44% and is now worth 63,83 per barrel. According to a recent study by the EIA, under certain scenarios, total USA crude oil production could surpass 14M b/d by 2050.

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