July 19 (UPI) -- A shift away from concerns about spare capacity to robust oil supply levels helped push the price of oil lower before the start of U.S. trading Thursday.
Higher crude oil prices caught the attention of U.S. President Donald Trump in early July, prompting a call for more oil from Saudi Arabia. A delicate balance between supply and demand, supported in part by security issues in Libya, shortages from Venezuela, and the potential loss of Iranian oil, meant only a few suppliers had spare capacity to put on the market.
Spare capacity refers to oil a producer could put in play in short order. Saudi Arabia is one of the few producers with any real spare volumes. The Organization of Petroleum Exporting Countries said in its July report that non-OPEC suppliers were contributing to supply growth and on Wednesday, the U.S. government announced domestic production hit 11 million barrels per day for the first time ever.
The U.S. Energy Information Administration added that domestic crude oil inventories increased by nearly 6 million barrel, easing some of the concerns about supply-side concerns.
"The build brings current stocks to around 1.8 percent below the five-year of EIA data, in from over 4 percent below the week prior," James Bambino, the managing editor for the Oilgram Price Report from S&P Global Platts, said in an emailed statement. "This means that not only are crude stocks rising, but they are also lining up more closely to historical norms."
The price for Brent crude oil, the global benchmark, was down 0.63 percent to $72.44 per barrel as of 9:22 a.m. EDT. West Texas Intermediate, the U.S. benchmark for the price of oil, was down 0.3 percent to $67.55 per barrel.
Giovanni Staunovo, a commodity analyst for UBS, said the entire commodity sector was taking a hit in early morning trading.
"Probably the strong U.S. dollar is one factor weighing on prices," he said. "Oil prices suffer from a well supplied market, following recovering Libyan production and higher output from Saudi Arabia, its Gulf Cooperation Council allies and Russia among still elevated Iranian crude exports."
GCC member states are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. Just at the open of U.S. trading, several industry contacts told UPI that Riyadh was only keen on preventing an oversupply situation.
Offering some positive support was an outlook on Asian economies from the Asian Development Bank. The ADP said it was expecting growth in gross domestic product for the economies of the Asia-Pacific at 6 percent for 2018 and 5.9 percent for next year, in line with previous forecasts.
"Although rising trade tensions remain a concern for the region, protectionist trade measures implemented so far in 2018 have not significantly dented buoyant trade flows to and from developing Asia," ADB Chief Economist Yasuyuki Sawada said in a statement.