Oil falls after rise in U.S. fuel stocks; doubt grows
over global growth
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[December 06, 2017]
By Amanda Cooper
LONDON (Reuters) - Oil prices fell on
Wednesday after a surprise rise in U.S. inventories of refined products
in what the market interpreted as a sign of flagging demand.
Brent crude futures <LCOc1> were down 48 cents at $62.38 a barrel by
1002 GMT, down 2 percent since last Wednesday, while U.S. crude futures
<CLc1> were off 46 cents at $57.16 a barrel.
With global equities under pressure from sliding technology stocks and
the U.S. bond market suggesting investors are cautious about the outlook
for economic growth, industrial commodities such as crude oil and copper
are feeling the pinch this week.
Supply cuts by the Organization of the Petroleum Exporting Countries,
Russia and other producers that were extended last week to all of next
year have helped lift Brent prices by more than 40 percent since June.
"The turn-down in risk sentiment is a nice justification for why you
might want to pare down some of the long positions taken going into the
OPEC meeting," London Capital Group's head of research Jasper Lawler
said.
"In the supply and demand picture for oil there hasn't been much change
... There is a general theme of selling back things that have recently
been outperforming, tech being the obvious one ... so if you are looking
across the asset spectrum and looking to sell things that have done
well, then oil fits into that category."
Traders said prices fell after an American Petroleum Institute (API)
report on Tuesday that showed a 9.2 million barrel rise in gasoline
stocks in the week ended Dec. 1, and an increase of 4.3 million barrels
in distillate inventories, which include motor diesel and heating oil.
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A worker prepares to label barrels of lubricant oil at the state oil
company Pertamina's lubricant production facility in Cilacap,
Central Java, Indonesia November 6, 2017 in this photo taken by
Antara Foto. Picture taken November 6, 2017. Antara Foto/Rosa
Panggabean/ via REUTERS
The perception that the higher fuel stocks pointed to weak demand outweighed a
drop in crude inventories by 5.5 million barrels to 451.8 million barrels,
traders said.
One factor that could undermine OPEC's and Russia's effort to cut supplies and
prop up prices is U.S. oil production <C-OUT-T-EIA>, which has risen by 15
percent since mid-2016 to 9.68 million barrels per day, close to levels of top
producers Russia and Saudi Arabia.
But a weaker economic performance and a decline in refinery capacity utilization
in the first quarter could be a drag on oil demand and dampen prices, said
Georgi Slavov, head of research at commodity broker Marex Spectron.
"Demand remains firm, which is the main reason for us to still see oil at/above
$60 per barrel. This is likely to change as we approach 2018," Slavov said in a
note.
"We are starting to pick up weakness in the macro performance of key oil
consuming regions. We are also starting to take note of the forthcoming
January–February decline in refinery capacity utilization," he said.
(Additional reporting by Henning Gloystein and Keith Wallis in SINGAPORE;
Editing by David Evans)
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