Oil prices inch lower on demand pressures

The market may be influenced later in the week if a storm system in the Gulf of Mexico develops into a hurricane.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Aug. 23, 2017 at 9:45 AM
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Aug. 23 (UPI) -- Indications of waning U.S. consumer demand overshadowed concerns about a storm in the Gulf of Mexico to help drag oil prices lower Wednesday morning.

The American Petroleum Institute offered a mixed report on the status of balance in the world's biggest economy. Late Tuesday, the API reported a decline in crude oil inventories of about 3.6 million barrels, but a 1.4 million increase in gasoline supply.

Refiners in the United States start shifting gears after September, which marks the end to the official summer travel season. Markets watchers already started looking forward to waning demand, while output from major producers remains robust.

An emailed report from London oil broker PVM said that, while forecasts are generally mixed, U.S. crude oil production might double by 2025 if crude oil prices remain in a range between $50 and $60 per barrel.

"It means that total U.S. crude oil production could well climb above 15 million barrels per day during this period," the report read.

That could skew the situation heavily toward the supply side, but also act to bring crude oil prices lower and possibly influence the forecast negatively.

Short-term, however, the forecast was offset somewhat by uncertainty about the status of production from Libya, a member of the Organization of Petroleum Exporting Countries excluded from production caps because of national security concerns. The Nigerian subsidiary of Shell, meanwhile, started operations as a gas prospect in the Niger Delta, a sign that companies are willing to move forward there despite recent security concerns.

The price for Brent crude oil, the global benchmark, was down 0.17 percent at 9:15 a.m. EDT to $51.79 per barrel. West Texas Intermediate, the global benchmark, was down 0.19 percent to $47.47 per barrel.

The market may be calm, however, as traders hold their fire ahead of the late morning release of official petroleum inventory levels from the U.S. Energy Information Administration, which tends to be less bullish than the API. A survey of analysts' sentiment from S&P Global Platts revealed expectations of a 3.7 million barrel draw on crude oil inventories and a 1.3 million drain on gasoline supplies.

The price of oil could be influenced later in the week by inclement weather in the Gulf of Mexico. The National Hurricane Center in Miami, Fla., reported that what's left of Tropical Storm Harvey could redevelop and bring hurricane-force winds to the southern coast of Texas later this week.

Anadarko Petroleum, which operates 10 facilities in the region, pulled non-essential staff from four installations as a precautionary measure, but said there have been no impacts to production at this time.

The U.S. Gulf of Mexico accounts for about 20 percent of total U.S. crude oil production and is a key shipping channel.

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