Crude oil trading resulted in West Texas Intermediate crude falling to its lowest price in eight months on Jan. 9.
This contract managed to decline in value as traders expressed their concerns about the supply-demand fundamentals that exist for the commodity, according to The Wall Street Journal. These industry participants emphasized that the demand for petroleum fell last week, and that domestically, the production of crude oil recently rose to record levels.
Prices fall to eight-month low
February WTI futures settled at $91.66 a barrel on the New York Mercantile Exchange, which represented the lowest closing price for the contracts since May 1, Bloomberg reported. In addition, brent futures scheduled for February settlement finished the session down 0.7 percent at $106.39 a barrel on the London-based ICE Futures Europe exchange.
Oil Production Surges
On Jan. 8, WTI experienced a 1.4 percent decline, which coincided with data released by the Energy Information Administration, indicating that during the most recent week, 8.15 barrels of crude were produced per day, according to the news source. This represented the highest amount generated since September 1998.
One factor that has helped to bolster the production of U.S. oil companies is advances in available technology, which have made it easier for industry participants to extract the commodity from shale rock formations, The Wall Street Journal reported.
“There’s been a huge increase in domestic crude-oil production,” Adam Wise, who works for Manulife Asset Management in Boston as a managing director, told Bloomberg. “The gains in output should continue. They’ve turned on the spigot and are getting better at finding ways to move the oil to market.”
Libya speculation helps provides headwinds
Another factor that helped stimulate crude oil trading and push the price of the commodity lower was speculation that in the near future, the African nation of Libya will start generating a greater amount of oil, according to Investing.com.
In 2013, the nation’s production of oil was curtailed sharply as protestors helped to hinder operations, the media outlet reported. Amid these challenges, Libya managed to create around 100,000 barrels per day. In 2014, this production has reportedly risen to 650,000 barrels per day. Even though Libya has started generating more oil, the nation is only generating roughly 50 percent of what it is capable of producing.
The Sharara oil field recently resumed generating the raw material, and other locations in the nation have started producing the commodity once again, according to Bloomberg. Ibrahim Al Awami, who is the top official at the oil ministry’s department of measurement and inspection, told the media outlet on Jan. 8 that crude supplied by Sharara will soon by exported by the port of Zawiya, which is located in Western Libya.
The price of oil received a minor boost during the day as a result of production problems in the North Sea, The Wall Street Journal reported. The Buzzard field, which usually generates about 200,000 barrels of oil every day, stopped operating, according to Bloomberg. Operator Nexen Inc. told the media outlet that the the field would soon be producing once again.
“The halt of Buzzard production gave the market a pop,” John Kilduff, partner at New York-based hedge fund Again Capital LLC, told the news source. “Disruptions in North Sea supply have repeatedly boosted prices over the last year.”
Government data indicates surging stockpiles
In addition, government reports indicating the robust stockpiles of oil that the United States has accumulated helped to put downward pressure on the price of the commodity, according to The Wall Street Journal.
Data provided by the EIA revealed that during the week that ended on Jan. 3, a total of 357.9 million barrels worth of oil were held in U.S. stockpiles, Investing.com reported.
In addition, the total reserves of motor gasoline inventories rose by 6.24 million barrels during the period, which was far higher than the increase of 2.28 million barrels that was expected, according to the news source. The existing stockpile of distillate fuel also rose during the week, increasing by 5.83 million barrels.
“We’re still digesting yesterday’s EIA data,” Bob Yawger, who works for Mizuho Securities USA Inc. as director of the futures division, told Bloomberg. “Crude supplies have dropped more than 33 million barrels in six weeks, which is huge. This is being balanced by an avalanche as far as the products are concerned.”
Demand concerns
Many traders have indicated that they are concerned about the demand that exists for distillates and gasoline, according to The Wall Street Journal. The reserves of these two rose by more than expected during the week ending Jan. 3.
“The fundamentals don’t look good,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, told Bloomberg. “Crude production continues to surge ahead and the refiners are processing this into fuel that is going into storage.”
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