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Oil falls 2.5% as U.S. refiners ramp up output, equities retreat

Commodities May 18, 2022 10:11PM ET
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© Reuters. FILE PHOTO: An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Mandatory credit Kyodo/via REUTERS

By Arathy Somasekhar

HOUSTON (Reuters) - Oil prices fell 2.5% on Wednesday, reversing early gains as traders grew less worried about a supply crunch after government data showed U.S. refiners ramped up output, and as crude futures followed Wall Street lower.

Brent crude futures for July settled down $2.82, or 2.5%, at $109.11 a barrel. U.S. West Texas Intermediate (WTI) crude for June fell $2.81, or 2.5%, to $109.59 a barrel.

Both benchmarks gave up early gains of $2-$3 a barrel following a change in risk sentiment as equity markets fell, said UBS analyst Giovanni Staunovo.

U.S. crude inventories fell by 3.4 million barrels last week, government data showed, an unexpected drawdown, as refiners ramped up output in response to tight product inventories and near-record exports that have forced U.S. diesel and gasoline prices to record levels. [EIA/S]

U.S. gasoline prices fell 5%, two days after touching a record high.

Capacity use on both the East Coast and Gulf Coast was above 95%, putting those refineries close to their highest possible running rates.

"While on the face of it, the report was extraordinarily bullish, they (refiners) are racing to put more refined product on the market... there's obviously a refiners response," said John Kilduff, a partner at Again Capital LLC.

The dollar strengthened and global stocks retreated on concerns about economic growth and rising inflation.

Bearish sentiment also followed reports that the United States is planning to relax sanctions against Venezuela and allow Chevron Corp (NYSE:CVX) to negotiate oil licenses with state producer PDVSA.

"The perception that we could see some more supply coming Venezuela coming into the market, along with the equity markets, it's causing some profit taking in a much-needed technical correction in the crude," said Dennis Kissler, senior vice president for trading at BOK Financial.

The European Union's failure to persuade Hungary to lift its veto on a proposed embargo on Russian oil was adding price pressure, although some diplomats expect agreement on a phased ban at a summit at the end of May.

Ongoing supply concerns remained supportive. Russian crude output in April fell by nearly 9% from the previous month, an internal OPEC+ report showed on Tuesday, as Western sanctions on Moscow curbed exports.

On the demand side, hopes of further lockdown easing in China boosted expectations of a recovery. Authorities allowed 864 of Shanghai's financial institutions to resume work, sources said, and China has relaxed some COVID test rules for U.S. and other travelers.

(The story corrects to remove paragraph on Brent discount to WTI as first-month Brent crude futures are for July while first-month WTI futures are for June.)

Oil falls 2.5% as U.S. refiners ramp up output, equities retreat
 

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Comments (8)
Tommy Lambert
Tommy Lambert May 18, 2022 9:30PM ET
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I wouuld think refiners ramping up production would be bullish, they have to buy oil to refine it.
Don Getty
Don Getty May 18, 2022 9:30PM ET
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not to mention we are heading into peak season with huge demand already eating inventory levels at a rate not usually seen - could be two years without summer holiday's setting up a perfect storm new production is not going to match that - the SR dump is only holding supply from having massive draw numbers - end of july we could easily see a massive move in all prices relating to oil products
Gershom Zvi
Gershom Zvi May 18, 2022 2:18PM ET
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Inventory manipulation
Gershom Zvi
Gershom Zvi May 18, 2022 2:16PM ET
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Last resort of Biden’s market is heading down ?
Alan Rice
Alan Rice May 18, 2022 2:16PM ET
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Oil: "I just can't get no RESPECT!!"
Hakimi Loubna
Hakimi Loubna May 18, 2022 12:17PM ET
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Hello
Alan Rice
Alan Rice May 18, 2022 12:17PM ET
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Yancho Dimitrov
Yancho Dimitrov May 18, 2022 11:13AM ET
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Xaaxa 2.20 % down. If this is steady i am submarine.
Marco cuevas
Marco cuevas May 18, 2022 11:13AM ET
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Schools a out to end 2hi h means no s hoop uses driving around and o parents driving to school twice a day so hope your oil profits k!,
Alan Rice
Alan Rice May 18, 2022 11:13AM ET
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(gurgle)
William Smith
William Smith May 18, 2022 9:10AM ET
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Amazing that one of Biden's first moves after taking office was to give in to the green movements pressure  and Democrat leftists and ban the Keystone pipeline and cancelling American drilling leases, making the US once again prisoners to OPEC, Russia and the middle east for oil.  Those moves also put pricing back in OPEC'S  hands.  At the same time kicking Canada in the groin by telling them we dont want their oil.  Those actions are largely responsible for the current price of oil irregardless of tje Russian/Ukraine war.  The press uses the war in their disinformation campaign but prices were heading up long before it started because of Biden's executive orders.  That move was a sad  day for America and the free world.
Marco cuevas
Marco cuevas May 18, 2022 9:10AM ET
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Green is the future whether you like it or not.....look at Texas one of the biggest exporters of oil in the past is now one of the top wind turbine energy producers....pretty soon new gas stations will be back ed across america...then what will you all complain about?
Tre Hsi
Tre Hsi May 18, 2022 9:10AM ET
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ahhh, are you tired of c&p the same bs over and over?  I guess not..........of course we all know the Keystone pipeline has nothing to do with production, it was meant to transport the oil already in production in pipeline instead of rail/trucks..........that's all, now you can go back to your rants
Red Maple
Red Maple May 18, 2022 9:10AM ET
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9,000 unused leases
Midnight Trader
Midnight Trader May 18, 2022 9:10AM ET
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Another faux news drone..
Butch Einsel
Butch Einsel May 18, 2022 9:10AM ET
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Tre Hsi your must have voted for the bumbling boob from Delaware Biden , please
Saleem Zaheer Zakhilwal
Saleem Zaheer Zakhilwal May 18, 2022 12:45AM ET
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