Oil rates fall 2% as US refiners ramp up output, equities retreat

Advertisement



By Arathy Somasekhar

HOUSTON (Reuters) -Oil prices reversed course and fell over 2% on Wednesday after government data showed US refiners ramped up output, easing worries of a supply crunch, and as traders took cues from a drop in equities market.



Brent crude was down $2.41 cents, or 2.4%, at $109.52 a barrel at 12:05 am ET (1605 GMT), while US West Texas Intermediate (WTI) crude fell $2.5 cents, or 2.2%, to $1 09.85 a barrel.

Brent settled below WTI on Tuesday – the first time since May 2020 – and was still unusually trading at a discount due to strong export demand and tightening US crude stockpiles.

US crude inventories fell by 3.4 million barrels last week, government data said, an unexpected drawdown as refiners ramped up output in response to tight product inventories and near-record exports that have forced diesel and gasoline prices to record levels in the United States. [EIA/S]

Advertisement

Capacity use on both the East Coast and Gulf Coast was above 95%, putting those refineries close to their highest possible running rates.

“While on the face of it, the report was extraordinarily bullish, they (refiners) are racing to put more refined product on the market… there’s obviously a refiner’s response,” said John Kilduff, a partner at Again Capital LLC.

Both benchmarks also gave up earlier gains of $2-$3 a barrel following a change in risk sentiment as equity

Advertisement
fell, said UBS analyst Giovanni Staunovo.

The dollar strengthened and global stocks retreated on Wednesday as concerns about economic growth and rising inflation soured sentiment.

Bearish sentiment also followed reports that the United States is planning to relax sanctions against Venezuela and allow Chevron Corp to negotiate oil licenses with state producer PDVSA.

“The perception that we could see some more supply coming Venezuela coming into the market, along with the equity markets, it’s causing some profit taking in a much needed technical correction in the crude,” Dennis Kissler, senior vice president for trading at BOK Financial said.

The European Union’s failure to persuade Hungary to lift its veto on a proposed embargo on Russian oil was adding price pressure, although some diplomats expect agreement on a phased ban at a summit at the end of May.

Ongoing supply concerns, however, were still helpful. Russian crude output in April fell by nearly 9% from the previous month, an internal OPEC+ report showed on Tuesday, as Western sanctions on Moscow curbed exports.

Advertisement

On the demand side, hopes of further lockdown easing in China have boosted expectations of a recovery. Authorities allowed 864 of Shanghai’s financial institutions to resume work, sources said on Wednesday, and China has relaxed some COVID test rules for US and other travellers.

(Additional reporting by Rowena Edwards in London, Isabel Kua in Singapore; Editing by Marguerita Choy and Jason Neely)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practice the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard,

Digital Editor





Source link

Leave a Comment

Your email address will not be published.