U.S. oil prices dipped below $40 a barrel several times this past week as heavy stockpiles continued to push crude lower. Light, sweet crude for December delivery fell as low as $39.89 a barrel on the New York Mercantile Exchange, the lowest intraday level since August, before it settled down 21 cents, or 0.5%, at $40.54 a barrel, only to again claw back under $40 and test the August lows again at the end of the week.
Inventories have seen strong growth at Cushing, Oklahoma, the delivery point for the benchmark U.S. futures contract, as the recent pattern of pushing out the bulls after the release of the weekly EIA storage data. Inventory rose 2.1 million barrels in the week ended Tuesday, with 1.8 million of those barrels coming since Friday, ac-cording to the data. The addition comes on top of data from Wednesday showing nationwide crude sup-plies increased by 300,000 barrels last week, according to the U.S. Energy Information Administration. The build in the EIA report was less than analysts expected but it was counter to a draw reported by the American Petroleum Institute, which had bulls excited prior to the EIA report. The inventory report showed resilience in U.S. shale oil production, which at 9.182 million barrels a day last week was only 3,000 barrels a day fewer than the previous week.
The data continues to put pressure on Saudi Arabia to agree to a compromise with other producers in the Organization of the Petroleum Exporting Countries, as other OPEC producers hope they can drive prices up by getting the Kingdom to slow its rampant production. OPEC plans to meet Dec. 4, but most analysts’ say Saudi Arabia will not back down from its efforts to keep customers by pumping more and undercutting competition.
A likely U.S. interest rate rise in December has continued to strengthen the dollar, which has also been increasing pressure on global oil prices, which are denominated in dollars. With stockpiles nearing historic highs, a mild winter and limited heating demand common during the continuing weather phenomenon El Nio could push oil toward $20 a barrel, analysts at Goldman Sachs Group Inc. said in their note on commodities that was sent to reporters on Thursday. Other industry experts still see prices rising to the $60s and $70s over the next 12 to 18 months, but for now it looks like as we approach Thanksgiving prices will be camped out around $40 as the turkey gets carved and the Christmas decorations go up.