Crude oil prices erased gains and tumbled to 10-month lows, dragging down Exxon Mobil (XOM), Chevron (CVX) and other energy stocks even though U.S. stockpiles fell more than expected. That comes after oil prices sold off Tuesday and amid a royal shake-up in Saudi Arabia.
Tumbling energy stocks were a drag on the Dow Jones industrial average and S&P 500 index. They both fell even as the tech-heavy Nasdaq rose solidly.
U.S. crude stockpiles fell 2.45 million barrels last week, the Energy Information Administration said Wednesday. That was a little less than the 2.72 million-barrel decline that the American Petroleum Institute reported late Tuesday. But analysts had expected a 1.2 million-barrel decline. U.S. gasoline stockpiles fell by 578,000 barrels last week while distillate supplies rose by about 1.1 million barrels.
Domestic crude production was 9.35 million barrels per day, edging up from 9.33 million barrels.
U.S. crude futures briefly rose above $44 a barrel on the EIA data, but reversed to close down 2.3% to $42.53 per barrel. That’s the lowest close since Aug. 10, 2016. Oil is expected to have the worst first half of the year since 1997.
Saudi Arabia’s Deputy Crown Prince Mohammed bin Salman was appointed Wednesday as heir to the kingdom’s throne. Thirty-one year old Salman is widely expected to continue current oil policies and was a major driving force behind Riyadh’s Saudi Vision 2030 reform initiative to reduce the No. 1 oil exporter’s reliance on crude.
But Salman’s foreign polices could lead to more instability in the Middle East. He has taken a hard stance against regional rival Iran and has supported the war in Yemen as well as cutting off diplomatic ties with Qatar.
As the de facto leader of OPEC, Saudi Arabia must rein on other members, whose production increases have weighed on oil prices this week.
On Tuesday, a Reuters source said Libyan oil production rose by more than 50,000 barrels per day (BPD) to 885,000 barrels per day, after ending a dispute with a German oil company that opened two more fields. Exports from Nigeria are expected to hit 226,000 BPD in August vs. 164,000 BPD in July, according to Reuters figures.
Both Nigeria and Libya are exempt from the current OEPC and top non-OPEC producer deal to remove 1.8 million barrels of crude per day from the market to help boost oil prices.
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About Oklahoma Minerals Founder GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.