Rising stocks fuel oil price doubts

23 September 1994

Evidence of rising stock levels in the US and a rebound in North Sea oil production after a series of summer shutdowns combined to put pressure on oil prices in mid-September. Prices for dated Brent slipped below $15.50 a barrel on 13 September having moved between $16-17 a barrel during August.

Several factors are at work. US stocks of distillates, including heating oil, were reported by the American Petroleum Institute (API) to be sharply higher in late August than at the same time last year. The API also reported US refinery utilisation at 96 per cent after summer closures for routine maintenance. The indications of high stocks and high refinery production have increased the pressure on US gasoline prices which were already weakening at the end of the summer holiday season.

Similar signs of increasing supply were apparent in the North Sea where production is recovering after the completion of summer maintenance schedules. North Sea supplies fell by about 550,000 barrels a day (b/d) during the summer due to shutdowns. This did not affect prices as there were adequate supplies from elsewhere.

OPEC output could also rise after tracking the quota very closely during recent weeks. The oil workers strike in Nigeria led to a 25 per cent cut in production which is now being restored. Analysts expect OPEC production to revive to about 25 million b/d in September. A Reuters production survey estimated August output at 24.54 million b/d, down by 240,000 b/d from the July figure.

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