Sharp gains in key US product stocks triggered a midweek sell-off in crude, some of which has already been clawed back after it emerged strike action could hit Nigerian production from Dec. 18, and traders realized overall US tanks were still falling. Energy Information Administration data released Wednesday showed a 6.8 million barrel build in US gasoline tanks — the largest weekly accumulation since January — while diesel stocks also rose 1.7 million bbl as US refiners ran flat out. Overall US tanks still dipped 2.5 million bbl on the week, 7% below year-earlier levels and a relatively narrow 3.9% surplus versus the five-year average in a sign market balances are still tightening. International benchmark Brent ended the week down $1.37 per barrel at $62.20/bbl Thursday, while US price-pin WTI closed at $56.69/bbl for a loss of 71￠/bbl. US crude production meanwhile hit a new record high of just over 9.7 million barrels per day last week. Forecasters expect oil balances to tighten further next year with production outages — like that expected in Nigeria — only serving to move market fundamentals even further Opec’s way. Prompt prices are at a premium to future supply out past a year ahead, supporting this view. But some analysts think the market backwardation is the result of forward selling, in anticipation of Opec’s “exit strategy” from its production deal, which will push more oil onto the market.
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