Oil prices crashed further on Wednesday, August 24, on an unexpected surge in U.S. crude stocks that reignited worries about the supply glut that has left prices for fluctuating in the past two years.
Global benchmark Brent crude was down 93 cents, or 1.86 percent, at $49.03 a barrel, after touching an intraday low of $49.07. U.S. West Texas Intermediate, WTI, crude was down $1.33, or 2.77 percent, at $46.77 a barrel, Reuters reports.
Brent briefly spiked above $50 in the previous session after Reuters reported Iran was sending positive signals that the country may support joint OPEC action to prop up oil prices.
According to the Energy Information Administration, U.S. crude stockpiles leaped by 2.5 million barrels to a total of 523.6 million barrels in the week through Aug. 19 as refinery inputs decreased and gasoline production dropped.
Analysts had expected a 455,000-barrel fall. U.S. crude oil imports averaged over 8.6 million barrels per day last week, up by 449,000 barrels per day from the previous week, according to EIA.
Over the last four weeks, crude oil imports averaged 8.5 million barrels per day, 13.3 percent above the same four-week period last year
Gasoline stocks were up by 36,000 barrels, compared with expectations in a Reuters poll for a 1.2 million-barrel drop. Distillate stockpiles, which include diesel and heating oil, rose by 122,000 barrels, versus expectations for a 400,000-barrel increase, the EIA data showed.
However analysts and traders remain skeptical that producers will come to an agreement at a meeting in Algeria scheduled for Sept. 26-28 as various OPEC members have their own agendas.
“There is currently a race to print any freeze headlines but we have not yet seen strong substance behind them,” said Olivier Jakob, managing director of PetroMatrix in Switzerland.
Iraq’s prime minister said on Tuesday his country had not yet reached its full oil market share, suggesting the government would not restrain crude output as part of any OPEC agreement.
“I really can’t see the sense for Saudi, in particular, to actually have some meaningful constraint on production because there is quite a lot of capacity of U.S. shale to come on quite quickly,” said Ric Spooner, chief market analyst at CMC Markets.
He said he could see prices drifting closer to $45 a barrel over the next few days.
China’s state-controlled oil firm CNOOC said on Wednesday an oil price recovery was facing “significant headwinds,” as it reported swinging to a loss in the first half of the year due to weak prices.
Concerns that Chinese crude demand could falter as Beijing clamps down on alleged tax evasion in the oil industry also weighed on prices in overnight trading.
Robust Chinese crude demand growth has been driven by independent refiners, also know as teapots, who began to import crude last June after obtaining government crude import quotas and licenses.
However, Beijing’s crackdown on alleged tax evasion in the oil industry, targeting the teapots, threatens to put a lid on Chinese demand.
