Wary Investors Unimpressed by Falling US Oil Output

Wary Investors Unimpressed by Falling US Oil OutputWary Investors Unimpressed by Falling US Oil Output

Not even a sharp decline in US oil production can convince investors that crude prices are ready to rebound.

Stubbornly high US inventories and resurgent output from OPEC, Russia and Canada have prompted money managers to cut bets on rising prices to the lowest level in four months. West Texas Intermediate crude fell last week even as US government data showed output slid to the least since May 2014, Bloomberg reported.

“The problem is that OPEC more than makes up for every barrel of lost US production,” said Stephen Schork, president of the Schork Group Inc., a consulting company in Villanova, Pennsylvania.

US production tumbled 194,000 barrels a day to 8.43 million in the week ended July 1, an Energy Information Administration report showed. Output has slumped 12% from the four-decade peak reached in June 2015. The Organization of Petroleum Exporting Countries boosted production 0.7% to 32.9 million barrels a day in June.

WTI fell July 7 after the EIA said US crude supplies shrank by a smaller-than-projected 2.22 million barrels to 524.4 million. Inventories remain at the highest seasonal level in at least a decade. Crude imports averaged 8 million barrels a day in the four weeks ended July 1, up 12% from a year earlier.

“While US production looks weak, there’s only been a modest decline in US inventories,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The offsetting factor has been very robust imports.”

Money managers cut net long wagers on WTI to the lowest since March in the week ended July 5, according to Commodity Futures Trading Commission data. WTI dropped 2.6% to $46.60 a barrel in the report week. Prices on Monday slipped 1.8% to $44.60 at 9:01 a.m. London time.

Iranian production has surged 25% this year to an average 3.5 million barrels a day, Bloomberg data show. Iran plans to pump 4 million barrels a day by year-end and reach 4.8 million within five years, Oil Minister Bijan Namdar Zanganeh said June 3 in Vienna. Russia exported an average 5.55 million barrels a day in the first half of 2016, up 4.9% from last year. It pumped 10.84 million barrels a day last month, up 1.1% from a year earlier, energy ministry data show.

Canadian oil-sands producers are restoring production after the worst wildfires in Alberta’s history. Suncor Energy Inc. and Syncrude Canada Ltd. are among the producers that have brought back more than a million barrels a day.