By Dan Molinski and Christopher Alessi
–Oil prices declined Wednesday after a pair of reports out of Washington showed domestic inventories of crude oil rose significantly, and the U.S. trade deficit jumped to a 10-year high.
–West Texas Intermediate futures, the U.S. oil standard, were down 1.3% at $55.82 a barrel on the New York Mercantile Exchange.
–Brent crude, the global oil benchmark, was 0.4% lower at $65.57 a barrel on London’s Intercontinental Exchange.
U.S. Inventories: Prices were being pushed lower Wednesday after the U.S. Energy Information Administration said Wednesday that U.S. stockpiles of crude oil jumped by 7.1 million barrels last week to 453 million barrels. Analysts were only expecting a 1.6-million-barrel rise. Still, gasoline and diesel fuel stockpiles declined by a combined 6.6 million barrels, which helped prevent a further selloff.
“While the headline crude build was bearish, this was largely offset by other products and thus the overall details were not nearly as bearish,” said Kyle Cooper, a consultant at ION Energy.
Trade: Broader pressure on oil prices, however, was coming from a U.S. Commerce Department report that showed the trade deficit rose to $621 billion last year, the highest since 2008 and despite President Trump’s efforts to reduce that shortfall.
“Bottom line is that the huge trade deficit today doesn’t bode well as far as GDP growth in first quarter,” said Peter Cardillo, chief market economist at Spartan Capital, who said weaker growth could hurt oil demand. “Markets are starting to realize this trade war isn’t working.”
OPEC+: The oil market overall continues to be supported by production curbs from the Organization of the Petroleum Exporting Countries and its allies that have helped to mop up a burgeoning supply glut and rebalance the market since the start of this year. Crude prices have climbed roughly 20% year-to-date, after having plummeted by around 40% in the fourth quarter of last year.
OPEC, de facto led by Saudi Arabia, and a group of 10 producers outside the cartel, led by Russia, agreed late last year to collectively hold back crude production by 1.2 million barrels a day for the first half of 2019. At the same time, U.S. sanctions on the oil industries of Iran and Venezuela — two OPEC members exempt from the latest production-cut deal — have also contributed to lower supply from the cartel this year.
OPEC’s “aggressive” cuts are largely priced in at this point, said Ole Hansen, head of commodity strategy at Saxo Bank. But “if the Venezuela [political] situation deteriorates further, it could give crude oil a spike,” he added.
— Baker Hughes on Friday will release weekly data on the number of rigs drilling for oil in the U.S.
–Industry conference CERAWeek is held in Houston March 11-15.
(END) Dow Jones Newswires
March 06, 2019 12:17 ET (17:17 GMT)
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