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Prices up on US crude stock data, American oil production forecast lowered

Oil prices

Oil prices rose slightly on Wednesday after US EIA data showed a significant drop in crude stocks. Encana photo.

Oil prices up after two days of declines

Oil prices crept higher on Wednesday after data from the US Energy Information Administration showed American refineries processed record amounts of crude last week, causing a drop in US crude stocks.

Brent crude was up 27 cents to $52.41 at 12:34 p.m. EDT and US WTI was up 15 cents to $49.32.

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Gains, however, were pared by a surprise uptick in gasoline stocks.

According to the US EIA, crude stockpiles dropped by 6.5 million barrels last week, a much bigger decrease than the 2.7 million anticipated by analysts.  Refiners processed nearly 17.6 million barrels of crude, a record high for any week since the US Department of Energy began keeping data in 1982.

“A drop in crude oil imports and another step up in refinery utilization accounts for the bulk of the decline in crude inventories,” David Thompson, executive vice president at Powerhouse, told Reuters.

“Demand for both gasoline and distillate fuels remains strong but it’s worth noting that gasoline demand should be strong at this time of year and we are drawing closer to the end of summer driving season.”

According to the data from the EIA, gasoline inventories rose by 3.4 million barrels, prompting a fall in gasoline futures of about 1 per cent to their lowest mark in nearly two weeks.  Analysts participating in a poll by Reuters had expected a drop of 1.5 million barrels.

For some, the drop in US crude stocks raised hope that the OPEC supply cut pact is beginning to have an impact on the global oil glut.

Earlier in the week, Saudi Arabia announced it will cut crude allocations to its customers next month by at least 520,000 barrels per day (b/d).  With the upcoming Saudi Aramco IPO, the Saudis are keen to tackle the oversupply of oil and boost crude prices.

The EIA says it expects US crude oil production in 2018 to rise by less than previously expected.

According to the EIA’s monthly short-term energy outlook, crude oil production averaged an estimated 8.9 million barrels per day b/d in 2016 and is forecast to average 9.3 million b/d in 2017.

EIA forecasts crude oil production to average 9.9 million b/d in 2018, which would mark the highest annual average production in U.S. history, surpassing the previous record of 9.6 million b/d set in 1970.

The agency also forecast that US oil demand for 2017 is set to grow by 340,000 b/d compared with a 310,000 b/d previously. For 2018, oil demand is expected to rise by 330,000 b/d vs 360,000 b/d previously.

US regular gasoline retail prices averaged $2.30 per gallon (gal) in July, down 5 cents/gal from the average in June but 6 cents/gal higher than in July 2016. During the April-through-September summer driving season of 2017, US regular gasoline retail prices are forecast to average $2.37/gal, 14 cents/gal higher than last summer. Annual average US regular gasoline retail prices are forecast to be $2.33/gal in both 2017 and 2018.

 

Posted in: Energy Financial

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