However, Trump's support of the Arab nations' isolation of Qatar could support prices in the near-term, says one expert.
The media is referring to it as "unexpected," but those focused on fundamentals presumably were not surprised Wednesday when news of a big U.S. stockpile rise caused West Texas Intermediate to plummet 5.1 percent to $45.72 and Brent to drop 3.7 percent to $48.27 per barrel.
The Energy Information Administration revealed that crude stocks have swollen by 3.3 million barrels to 513 million barrels, contrary to the 3.5 million drop many forecasters as well as the American Petroleum Institute had predicted; indeed, the IEA reported a drop in gasoline demand of about 500,000 barrels per day.
Bloomberg television noted that the IEA's disclosure of a build in gasoline of 3.3 million barrels and distillates of 4.4 million was important because the summer driving season is underway and there should be drawdowns of these products.
We think inventories are going to be close to normal by the end of the year
Bjarne Schieldrop, SEB Markets
Many experts had predicted a gasoline rise of only 580,000 barrels and a distillate gain of 281,000 barrels.
As traders reacted, analysts such as Bjarne Schieldrop, chief commodities analyst at SEB Markets, called for calm: "The market just has to be patient; we think inventories are going to be close to normal by the end of the year," he said.
But in a month that has seen rapidly mounting concern that full-out pumping from the U.S. and other nations makes the extension of the Organization of the Petroleum Exporting Countries' (OPEC) production cutback agreement virtually ineffective in combating the global glut, maintaining patience is easier said than done, and once again all eyes are on the latest potential monkey wrench to the market, namely, the spat between Arab nations and Qatar.
The disagreement, in which Saudi Arabia and allies have cut ties with Qatar because they believe it is aiding terrorists and Iran, caused market declines earlier this week but was dismissed on Tuesday; on Wednesday, Qatar once again made headlines with U.S. president Donald Trumpreportedly bringing "reality to the situation" in the Middle East by backing the Saudi-led coalition.
Sadad al-Husseini, former executive for Saudi Aramco, credited Trump for focusing attention on the risk posed to the Middle East energy industry by a lack of security and stability: "This kind of situation is a way to maybe give Qatar a wake-up call that they need to work with the rest of the Gulf states to stabilize the region to try to undermine all the terror that's going on across the whole Middle East."
While some experts worry that the conflict itself could cause lingering instability, Jeffrey Halley, analyst at OANDA, thinks Qatar's isolation could be beneficial to prices: he explained that "Port restrictions on Qatari flagged vessels are going to cause loading disruptions" and that this could "put a floor on crude in the short-term rather than starting a panic rally."
Skangas duel fuel LNG carrier Coral Energy (image credit/Skangas)
Liquified natural gas (LNG) bunker tanker Coralius has made its first trip loading and delivering LNG to and from Norwegian ports, according to trade press reports.
The 5,800 cubic meter capacity tanker, which is owned by Norwegian gas company Skangas, was delivered to the company in June. Skangas also operates LNG carrier Coral Energy.