Crude oil prices plunged Thursday on a smaller-than-expected decline in U.S. crude inventories and fears of a global economic slowdown due to the U.S.-China trade war, Kallanish Energy understands.
The U.S. Energy Information Administration reported crude stockpiles fell nearly 300,000 barrels last week, less than the 900,000 Bbl decline analysts forecast in a Reuters poll, and well below the 5.3-million-barrel draw the American Petroleum Institute reported late Wednesday.
The decline last week reduced crude stocks from their highest volume since July 2017 recorded the previous week. At 476.5 million barrels (Mmbbl), total volume still was roughly 5% above the five-year average for this time of year.
Brent futures fell $2.88, or 3.9%, to $66.54 a barrel. U.S. West Texas Intermediate crude settled down 3.8%, at $56.59/Bbl.
The bigger decline in Brent cut the global benchmark’s premium over WTI to roughly $10/Bbl, down from a more than four-year high of $11.59/Bbl Wednesday.
“An escalating U.S.-China trade war represents a risk to oil markets,” Bernstein Energy said, in a note.
Oil prices have been supported this year by output cuts of roughly 1.2 Mmbpd from the members of Opec+, which includes most members of Opec, along with a number of non-Opec producers led by Russia.
Also helping prop up prices were falling supplies from Opec members Iran and Venezuela due to U.S. sanctions.
Iranian May crude exports dropped to less than half of April levels, at roughly 400,000 barrels per day (Bpd) after the U.S. tightened sanctions on Tehran’s main source of income. Iran needs to export at least 1.5-2.0 Mmbpd of crude to balance its books.
Many analysts expect Opec+ supply cuts to be extended until the end of 2019 as the group wants to prevent oil prices from falling back to levels seen in late 2018 when Brent slumped to $50/Bbl.
Since Opec+ started withholding supply in January, oil prices have risen by roughly 30%.
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