Oil Prices Drop Following Significant Increase

On Thursday, oil prices dropped after a previous-day rise with Brent crude almost hitting the 70-dollar mark. Production cuts from OPEC and Russia, and U.S. sanctions against Iran and Venezuela have helped the increase in oil price levels.

WTI Crude fell by 0.29 percent, dropping $-0.18 to $62.28, while Brent Crude fell to $69.06 following its previous high of $69.96. The OPEC Basket gained 0.76 percent two days ago and was last seen at $68.83.

Despite the fall, oil prices still show signs of progress with WTI and Brent remaining up more than 25 percent and 28 percent, respectively, this year.

The chief market strategist at CMC Markets in Sydney explained, “There is a clear bias to the upside with the supply restrictions, and there's a much better than expected demand picture after the recent China and U.S. PMI numbers, along with a potential kicker from any U.S.-China trade agreement.”

The Energy Information Administration (EIA) reported crude oil inventories have grown by 7.24 million barrels last week, and it showed that gasoline inventories dropped by 1.78 million barrels, compared to expectations for a draw of 1.54 million barrels, while distillate stockpiles dropped by 2.0 million barrels, compared to forecasts for a decline of 0.51 million.

Production of crude grew to 100,000 bpd and hit a record of 12.2 million bpd with net U.S. crude imports rising last week by 386,000 bpd.

Andrew Lipow, president of Lipow Oil Associates in Houston, said, “The market was originally surprised by the crude oil build but on closer inspection it’s all on the Gulf Coast which can be a reflection of unscheduled refinery outages as well as closure of the Houston ship channel impacting exports,”

Restrictions were placed last week after a massive petrochemical fire and spill near Houston, which had stopped vessel traffic for several days.

“Overall, it’s surprising to see refinery utilization nationwide as low as it is, which has contributed to a decline in product inventories supporting the market,” Lipow added.

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