Oil Prices Drop as US Stockpiles Jump to Hit Record

Oil prices fell to their lowest point in 2018 on Thursday after government data reported that US crude and fuel stockpiles jumped to a record high of 10.25 million barrels per day last week.

The international benchmark Brent crude dropped $0.07, or 0.11%, at $65.44 per barrel. It slid to its lowest for the year at $65.12 a barrel early in the session.

US West Texas Intermediate (WTI) crude futures were down $0.19, or 0.3%, at $61.60 per barrel.

“Brent has now turned negative for 2018, while WTI isn’t looking great either,” said Fawad Razaqzada, market analyst at futures brokerage Forex.com.

The falls came after the US Energy Information Administration (EIA) reported that crude inventories soared 1.9 million barrels last week ending February 2. US crude production also jumped to 10.25 million barrels per day, exceeding the prior record of 10.04 million bpd in 1970.

“US weekly oil production registering 10.25 million bpd in today’s report has unsettled the market – the impact of which is manifested as weakening oil prices,” said Abhishek Kumar, senior energy analyst at Interfax Global Gas Analytics in London.

Stockpiles of gasoline rose by 3.4 million barrels, while stockpiles of distillate fuels also soared 3.9 million barrels, according to the EIA.

“What surprised the most was the large spike in oil production to 10.25 million bpd, which was significantly higher than 9.92 million bpd from the previous week,” Razaqzada said. “Clearly, the data points to an imbalanced market and oil prices have responded by turning sharply lower.”

Weekly crude imports dropped by 60,000 bpd to 6.605 million bpd, reported the EIA. Exports fell by 478,000 bpd to 1.287 million bpd, but the Strategic Petroleum Reserve reached 500,000 more barrels for a total of 665.1 million barrels.

On Tuesday, the EIA predicted that US production would average 10.6 million bpd this year, enough to continue surpassing output from Saudi Arabia. The EIA also predicted that American output would reach 11.2 million bpd in 2019, enough to exceed Russia, its rival.

The rising US output could offset production curbs led by OPEC and Russia, putting more downward pressure on prices.

“Bullish sentiment that was built on OPEC cuts and geopolitical unrest is slowly fading away as recognition of US production surpassing 10 million bpd sinks in, which also puts Saudi Arabia and Russia at risk of losing further market share,” according to the analysts at Drillinginfo.com.

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