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News: Brent backs off US$58 amid rising US crude stockpiles

  1. Brent crude backed off US$58 today as the tentative rally stuttered, as US stockpile stats gave traders some cause for thought.

    Weekly inventory figures from the American Petroleum Institute revealed another significant increase in the country’s crude surplus, and sent a timely reminder that supply does not match demand.

    A further 6mln barrels were added to the ocean of crude currently in storage in the United States, it comes after a 12mln barrel rise last week.

    Attentions now turn to today’s more closely followed US Department of Energy stats for the same period. Last week the stockpile, as measured by the DoE, grew by 9mln barrels to the highest level since records began in 1982.

    Today’s report is expected to show a 3.2 increase.

    The US stockpile figures add to the view in some quarters of the market that crude is seeing a temporary correction in a bearish trend - suggesting the black stuff will soon resume its decline.

    Nevertheless, trading at around US$57 per barrel today Brent crude is some 25% higher than at the end of January, while West Texas Intermediary futures have recovered to almost US$52.

    The rally comes amid signals that oil price collapse has forced tough decisions for producers, and that the fundamentals for a recovery were falling into place.

    Stats last week showed the biggest ever weekly drop in the industry’s active rig count – with nearly 100 drilling units put on hold. Similarly, more white flags were waved as Shell, BP and BG all made big reductions to capital investment plans.

    Although there has been no joined together OPEC-style talk of curtailing western production, the sum total of reporting season points to an evitable slowing of production growth.

     

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