Oil prices mixed, but below five-month highs

Oil prices were mixed in trading on Wednesday, but remain on track for monthly gains. PDC Energy photo.

Oil prices gains capped due to increasing US production

On Wednesday, oil prices were mixed in trading despite a surprising drop in crude stocks reported by the US Energy Information Administration.

US WTI rose by 26 cents to end the session at $52.14/barrel, and benchmark Brent dropped by 54 cents to $57.90/barrel. Both Brent and WTI are on track for monthly gains thanks to stronger demand due to ramped up production at US Gulf Coast refineries getting back online after Hurricane Harvey shuttered production.

“Gains in WTI oil prices will be capped because of recovering oil production in the U.S.,” Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics told Reuters.

On Wednesday, the EIA reported crude inventories dropped by 1.8 million barrels in the week to Sept. 22. Analysts had been anticipating an increase in oil stocks by 3.4 million barrels.

Gasoline stocks rose, according to the EIA and distillate inventories were down.

With refining facilities back in operation in the wake of Harvey, refinery utilization rates rose by 5.4 per cent.

But hurricane activity in the Caribbean continues to impact US refining. Reuters reports that one refinery, Monroe Energy in Trainer, Pennsylvania ran out of oil due to shipping delays on the East Coast.

Analysts believe that the effects of Hurricanes Irma and Harvey will damped demand for some time and may increase gasoline inventories while crude stocks fall due to increased refining activity.

The EIA reports US production sat at 9.55 million barrels per day (b/d) and exports also increased to a weekly record of 1.5 million b/d.

“Seeing exports of U.S. produced crude that large would pose a threat to the level that the Brent-WTI premium can go,” Gene McGillian, manager of market research at Tradition Energy told Reuters.

US gasoline stocks were up by 1.1 million barrels, according to the EIA weekly data. Analysts participating in a Reuters poll anticipated at 921,000 barrel drop.

Distillate inventories, including diesel and heating oil, were down by 814,000 barrels, lower than the 2.2 million barrels forecast by analysts.