US West Texas Intermediate crude fell below $62 a barrel on Wednesday (February 7), putting it on pace for its worst weekly performance since May 2017.
Meanwhile, Brent crude futures were down 2.4 percent, at $65.29 a barrel, marking the first time since December 2017 that they have fallen below $66. Prices are down 4.8 percent for the week.
The oil price drop occurred after the release of new data showing that US crude stockpiles increased by 1.9 million barrels last week. That contradicts an earlier report suggesting inventories had dropped.
Industry experts are calling the report bearish. John Kilduff, a partner at Again Capital, told Reuters, “[t]he report was squarely bearish with the across-the-board inventory rise. The ability of crude oil inventories to rise in the face of a snap back higher in refinery utilization was particularly bearish.”
The increase in supply was largely due to a build up of stockpiles in the Gulf Coast refining hub, where refiners are winding down operations for seasonal maintenance.
Also affecting oil prices was the shutdown of the the Forties pipeline, Britain’s most important oil and gas pipeline. On Wednesday, automated safety systems shut down the 450,000-barrel-per-day system due to an undisclosed issue. That was the second time in two months that the system had shut down.
After the announcement, a spokesperson for Ineos, which operates the pipeline, stated, “[w]e have now identified the issue that caused this and are hoping to resolve it this evening. We then plan to start-up again overnight.”
It is worth noting that preliminary figures from the US Energy Information Administration show that US production hit 10.25 million barrels a day last week. Surging US production continues to threaten OPEC’s efforts to reduce the supply glut in the market.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.