Refineries slow as OPEC and fracking brings in more crude

From Bloomberg

crude oilA US government report shows that US refineries unexpectedly reduced operating rates while stockpiles of crude at the nation’s largest hub rose. Refineries operated at 93.1 percent of their capacity, down from 94.6 percent the previous week. The rate had been expected to climb to 95.1 percent by analysts in a Bloomberg survey. Crude supplies at Cushing, Oklahoma, the delivery point for oil futures traded in New York, rose for the first time since April.

Oil has rebounded from a six-year low as falling US stockpiles and a slowdown in drilling data showing that producers elsewhere are pumping more. US production will peak at a 43-year high this year before trailing off in the second half, the Energy Information Administration said last week. The Organisation of Petroleum Exporting Countries (OPEC) decided to maintain its output target at a meeting this month in Vienna.

“We still have ample supplies of crude,” Chip Hodge, who oversees a $9-billion natural-resource bond portfolio as senior managing director at John Hancock in Boston, said by phone. “The market remains vulnerable to the downside until we start to see the drop in rig counts have a major impact on production.”

West Texas Intermediate for July delivery fell 5 cents to $59.92 a barrel late morning Wednesday on the New York Mercantile Exchange. Prices earlier climbed as much as 2.4 percent.

Brent for August settlement gained 33 cents, or 0.5 percent, to $64.03 a barrel on the London-based ICE Futures Europe exchange.

Nationwide crude inventories slid 2.7-million barrels to 467.9-million barrels in the week ended June 12, EIA data show. A 1.8-million barrel supply decline was projected by analysts in a Bloomberg survey.

US output has surged to the highest level in more than four decades as the combination of horizontal drilling and hydraulic fracturing, or fracking, unlocked supplies from shale formations in the central part of the nation.

Gasoline stockpiles increased 460,000 barrels to 217.8-million.

OPEC maintained its output quota of 30-million barrels a day at a June 5 meeting as it sought to defend market share against higher-cost producers. The group has exceeded its target over the past year.

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