Crude Posts More Losses as Kuwait Declares Market to be Entering a "Very Stable Stage"

Kuwait is among a host of countries boosting output. File Image / Pixabay

Yet more signs that the world's crude supply is a lot healthier than skeptics would think contributed to another price drop for both benchmarks on Wednesday, with West Texas Intermediate falling $1.10 to $67.66 per barrel, and Brent down $1.87 to $72.34 per barrel.

The losses followed the Energy Information Administration disclosing that U.S. commercial crude inventories rose by 3.8 million barrels in the week through July 27, dramatically contradicting analysts who expected a decrease of 2.8 million barrels - however, since the buildup was attributed to a 50 percent drop in shipments from the Gulf Coast, inventories are expected to decline over the next few weeks.

Another sign that there's plenty of oil to meet all needs came from Kuwait, which on Wednesday reported that the country increased production in July by 100,000 barrels per day (bpd) from June's average.

Wednesday's market performance was also said to have been pressured by concern that global trade tensions could stunt economic growth: Abhishek Kumar, senior energy analyst at Interfax Energy, remarked that "Ratcheting up of trade tensions between the U.S. and China has brought oil prices under significant selling pressure.

"Market participants are awaiting additional tariffs by the U.S. on the next tranche of imported goods from China."

Wednesday's price drops combined with even more spectacular losses on Tuesday suggests that the sheer volume of evidence proving international producers can turn on the taps to counter any shortfalls has become too persuasive for traders to ignore; and as if to further quash analytical worries that we're headed for a market tightening, Bakhit al-Rashidi, oil minister for Kuwait, told media that the global oil market is approaching stability based on current production levels.

He said, "It is clear today based on the current level of production that we are approaching a very stable stage ... whether for the consumers or the producers," and he added that his country is now pumping 2.8 million bpd with a capacity of 3.1 million bpd.

Plus, Rashidi said he hoped oil production from the Neutral Zone, which Kuwait shares with Saudi Arabia and is the only place in both countries where foreign oil firms have equity in oilfields, would resume "very soon" (the oil fields were shut in 2014 and 2015 for environmental reasons and operational difficulties).

On Tuesday, crude posted its biggest monthly loss in two years due to deflating geopolitical tensions and increasing output from a variety of producers.