Oil Prices Down Again As Traders Fret Over U.S. Stockpile Build

Meanwhile, the EIA predicts record U.S. 2023 output: File Image/Pixabay

It was back to a downward trajectory for oil prices on Tuesday, with the seemingly endless concern about demand gripping traders and inspired by a rise in U.S. crude stocks.

After it was learned from market sources that stocks rose by about 2.2 million barrels for the week ended August 5 (compared to expectations of a 400,000 barrel drop), Brent settled down 34 cents at $96.31 per barrel, and West Texas Intermediate settled down 26 cents at $90.50 per barrel.

Another major influence in Tuesday’s trading was news that some oil exports had been suspended on the Russia-to-Europe Druzhba pipeline that transits Ukraine: initially prices rose on expectations that the shutdown would tighten supplies, but prices reversed course as it became clear the pipeline would resume full operation within days.

Flows via Druzhba’s northern leg, which supplies Germany and Poland, remained unaffected.

Oil is now down over $40 from its peak following Russia's invasion of Ukraine, which briefly caused Brent to climb as high as $139 per barrel.

John Kilduff, founding partner at Again Capital, said the Druzhba reportage “is a reminder of the global supply fragility," and he added that "concerns over the global economy remain a significant headwind, however…there is no room for error, in terms of supplies or additional disruptions.”

But despite demand fears, surging costs, labour shortages and other factors pummelling the economy, U.S. oil production remains on track for a record 2023: that was the message delivered on Tuesday by the Energy Information Administration, which pegged output to expand at an average rate of 840,000 barrels per day (bpd) next year for a yearly total of 12.7 million bpd.

While this figure is down from a prior forecast of 860,000 bpd it is still higher than the current record of 12.3 million bpd set in 2019.

The agency also predicted that global petroleum consumption would grow by 2.1 million bpd this year and next but warned of risks: “Less robust economic activity in our forecast could result in lower-than-forecast energy consumption.”

In related news on Tuesday, Scott Sheffield, chief executive officer at Pioneer Natural Resources Co., told media that the outcome of Washington’s proposed new minimum tax on corporations and fees for methane emissions on the roughly 15,000 small oil and natural gas explorers in the U.S. could be fewer wells drilled in the future.

He said, “There will be more pressure on that small mom-and-pop independent; it may put a lot of them out of business.”