Crude oil futures extended their losses yesterday after notching up declines every day so far this week, hit by growing US stockpiles and an expanding global glut.
Oil prices fell more than 1% yesterday; down for the fourth day as the US government reported a larger-than-expected crude stockpile build.
Some analysts said the slide could have been even steeper if not for a bigger-than-expected drawdown in gasoline supplies. The Energy Information Administration (EIA) said crude inventories rose by 7.6m barrels for the week ended October 9.
That was more than double the build of 2.9m barrels expected by analysts in a Reuters poll, although lower than the 9.3m barrels that had been indicated by industry group American Petroleum Institute (API) in a report on Wednesday.
The crude build comes amid lower processing of oil in the US as refiners shut for maintenance after the peak summer driving season.
Gasoline stockpiles fell by 2.6m barrels, as less of the motor fuel was turned out last week. Refinery utilisation in the US mid-west fell to the lowest on record since 2010, EIA data showed.
“The rebound in gasoline demand is the bright spot in this report,” said Matt Smith, director of commodity research for Clipper Data, an energy database and consultancy.
Still, prices of US crude and global oil benchmark Brent were down about 7% or more on the week, after losses since Monday on worries about record Opec production.
Meanwhile, it was speculated upon yesterday that Iran’s return to the global oil and gas market could push OPEC to change its strategy and slash production in order to prevent oil prices from falling lower.
Bloomberg also noted that Norwegian oil companies are turning on the spigots to counter plunging crude prices.
Production is running ahead of forecasts from the Norwegian Petroleum Directorate, beating August and September estimates by 13% and 12%, respectively.
The NPD, which had predicted oil output would fall this year, now says it will likely instead rise for a second year, following more than a decade of decline. That’s adding production into an oversupplied market where OPEC and Russia are also increasing output.
The Norwegian coalition government is struggling to cope with a 40% drop in crude prices over the past year. The government is spending a record amount of the nation’s oil wealth to plug budget deficits and stimulate the economy.
The offshore industry, set for the biggest fall in investments in 15 years, has already announced more than 25,000 job cuts since the beginning of last year.
While helping state coffers in the short term, increasing production at today’s low crude prices could mean a drop-off in income for the government and potentially its wealth fund in the years ahead.
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