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.” UPI
