Oil Prices Drop Sharply Despite Large U.S. Inventory Draw
WTI falls over 3% to $93, pressuring Bakken crude values, despite an 8-million-barrel drop in commercial stocks.
Front-month West Texas Intermediate crude futures fell sharply on Thursday, dropping $3.02 to settle at $93 per barrel, a decline of 3.15%. The global benchmark Brent crude also fell, losing $2.57 to $95.24 per barrel, according to live market data.
The sell-off occurred despite a significant weekly drawdown from U.S. commercial crude inventories. The Energy Information Administration's latest weekly report showed stocks, excluding the Strategic Petroleum Reserve, fell by 8 million barrels to 433.7 million barrels for the week ending May 29, Rigzone reported.
The price drop widened the discount for Bakken crude at the wellhead. The Bakken differential versus WTI was quoted at -$3.42 on Thursday. This means Bakken producers are realizing prices approximately $3.42 per barrel below the WTI benchmark, or roughly $89.58 per barrel before further transportation costs.
In contrast to crude, natural gas prices saw a gain. The front-month contract rose $0.14 to $3.35 per MMBtu on Thursday.
Market analysts often view large inventory draws as a sign of strong demand or tightening supply, which typically supports prices. Today's contrary price action suggests traders may be focusing on broader macroeconomic concerns or expectations of future supply increases that outweighed the bullish inventory data.
For Bakken operators, the combined effect of a lower benchmark price and a persistent differential directly impacts cash flow and drilling economics. A price near $90 for Bakken crude can shift the profitability margin for some wells in the play, potentially influencing decisions on completing drilled but uncompleted wells (DUCs) or deploying new rigs.
The price environment remains volatile. Operators will be watching for sustained trends in both global benchmarks and local differentials to guide capital spending plans for the remainder of the year. The inventory data, while bullish on its face, was not enough to counter other bearish forces in the market on Thursday.
Source
Live price data and Rigzone reporting on EIA weekly petroleum status report.
