Here's Why Oil Prices Dipped to almost $50 Today

Here's Why Oil Prices Dipped to almost $50 Today

Here's Why Oil Prices Dipped to almost $50 Today

USA crude stocks fell last week as refineries hiked output, but gasoline supplies, which are already seasonally high, surprisingly increased, the Energy Information Administration said on Wednesday.

"It seems that the optimism in the oil market we have seen since the last few days of March is running out of steam", wrote Tamas Varga, PVM Oil Associates analyst, noting concerns about the "ever-increasing rise" in USA shale output.

Oil edged lower on Wednesday, after United States data showed a smaller-than-expected decline in overall crude inventories coupled with another rise in production, hindering OPEC's efforts to reduce a global surplus of crude.

USA crude futures settled down US$1.97 to US$50.44 a barrel, a 3.8 per cent drop, the worst-one day decline since March 8, as investors bailed out of long positions in response to the bearish inventory figures.

Gasoline stockpiles climbed 1.54 million bbl last week, surprising analysts surveyed by Bloomberg who projected the Energy Information Administration data would show a 2-million-bbl decrease.

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Refinery crude runs rose by 241,000 barrels per day, EIA data showed, with a sharp increase in Gulf Coast refining activity.

OPEC and a group of 11 other oil producing countries agreed late last year to cut their collective production by 1.2 million barrels per day through the first six months of this year, hoping that their market intervention might eat away at the global glut of crude and push prices upwards. It was the lowest close since March 31.

"There's been a lot of attention paid to OPEC production cuts, while nearly nobody has focused on the gains elsewhere", Stephen Schork, president of Schork Group Inc., a consulting company in Villanova, Pennsylvania, said by phone. "Production is up nine straight weeks here to the highest level since August 2015. The U.S. has increased production by about 600,000 barrels a day since the OPEC agreement, mitigating their cuts". American refiners typically boost operating rates at this time of year as they prepare for the summer surge in gasoline demand.

The declines are welcome news after steady gains earlier this year that pushed petroleum inventories to record levels.

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