Oil prices dip on weaker-than-expected US crude draw

Oil prices hit prices not seen since mid-2015 early on Wednesday, but later retreated on EIA data on US crude stocks. Linn Energy photo.

Oil prices mixed in trading

Oil prices prices hit their highest mark since mid-2015, but then dipped slightly on Wednesday after data from the US Energy Information Administration showed a smaller-than-expected draw on US crude stocks.

By 1:26 p.m. EDT, benchmark Brent was down 25 cents to $60.69/barrel and US WTI had risen by 1 cent to sit at $54.39/barrel.  The Canadian Crude Index was up 42 cents to $39.94.

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According to the EIA, US crude stocks fell by 2.4 million barrels in the week of Oct. 27.  Analysts in a Reuters poll had anticipated a drop of 1.8 million barrels, well below the American Petroleum Institute’s report released late Tuesday that showed a decline of 5.1 million barrels.

“Oil prices fell since the release of the (EIA) report,” Carsten Fritsch, oil analyst at Commerzbank AG told Reuters.  He added that the crude draw was “significantly less than the API numbers.”

Prior to the release of the EIA data, Brent was trading at $61.70/barrel, its highest level since July 2015, after data showed OPEC members participating in the supply cut pact had significantly improved compliance with the deal.

During October, OPEC’s output fell by 80,000 barrels per day (b/d) and adherence to the pact reached 92 per cent, up from September’s 86 per cent.

As well, Russia is expected to support extending the agreement to the end of 2018.

WTI neared July 2015 highs as well, as climbed to $55.22/barrel during early trading hours.  Both Brent and WTI showed strong gains in October.

“The bulls have it and momentum is strong,” Saxo Bank senior manager Ole Hansen told Reuters.

“We know how oil can easily run ahead of what is fundamentally justified and we’ve seen that in both directions in the last couple of years,” he said. “We really need to see demand growth pick up even more strongly than what is currently expected for the bullish outlook for to be maintained.”

Analysts warn that the global crude glut could return when the OPEC deal ends, especially if US output continues to rise.

“We could rapidly … go from a predicted deficit of around 260,000 barrels to a surplus of close to 1.5 million barrels. Prices would undoubtedly collapse,” Matt Stanley, fuel broker at Freight Investor Services, told Reuters.