SINGAPORE, 3 May 2018:
Oil prices fell early today, pulled down by a rise in US crude inventories and record weekly US production – which is countering efforts by producer cartel OPEC to cut supplies and prop up prices.
Prices were pulled down by a report from the US Energy Information Administration (EIA) yesterday showing US crude inventories jumped by 6.2 million barrels to 435.96 million barrels in the week to April 27 – marking a 2018 high.
“The (EIA) report showed a much larger than expected crude build for last week as well as an unexpected build in gasoline inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
US oil production also hit a fresh record of 10.62 million barrels per day (bpd), a jump of more than a quarter since mid-2016.
The US now produces more crude oil than top exporter and OPEC-kingpin Saudi Arabia. Only Russia currently pumps more oil, at around 11 million bpd.
O’Loughlin said that relatively high oil prices, supported by healthy demand and production cuts by the Organisation of the Petroleum Exporting Countries (OPEC) to tighten markets, “are encouraging US shale producers to continue ramping up production.”
Meanwhile, the US Federal Reserve held interest rates steady yesterday and expressed confidence a recent rise in inflation to near the US central bank’s target would be sustained – leaving it on track to raise borrowing costs in June.
The upgrading of the Fed’s inflation outlook represented a milestone after roughly six years of price gains falling short of its 2% goal, even as key aspects of the economy saw a healthy recovery from the 2007-2009 recession.
The Fed’s rate-setting committee also downplayed a recent slowdown in economic and job growth, saying activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.
It said inflation had “moved close” to its target and that “on a 12-month basis is expected to run near the Committee’s symmetric 2% objective over the medium term.”
The Fed’s decision to leave its benchmark overnight lending rate in a target range of between 1.5% and 1.75% was unanimous. Investors had all but ruled out another increase at this week’s meeting.
The Fed raised rates in March and currently forecasts another two increases this year, although an increasing number of policymakers see three as possible. Investors overwhelmingly expect a rate hike at the June 12-13 policy meeting.
– Reuters