Oil prices up by pennies after data shows significant draw in US crude stocks

Oil prices backed off session highs

Oil prices rose by over 1 per cent on Wednesday, but as the session continued gains were pared despite data from the US Energy Information Administration showing a significant decline in US crude stocks.

Brent crude futures were up 44 cents to $47.96/barrel by 12:33 p.m. EDT and US WTI crude was up 63 cents to $45.67/barrel.

According to the EIA, US crude inventories fell by 7.6 million barrels in the week ending July 7, the biggest decline since September, 2016.

Analysts participating in a Reuters poll had anticipated a drop in inventories of 2.9 million barrels and the American Petroleum Institute predicted a decline of 8.1 million barrels.

US crude stocks now stand at 495.4 million barrels, in the upper half of the average for this time of year.

EIA data showed US gasoline inventories were down by 1.6 million barrels and remain in the upper average of the range.

“U.S. gasoline demand remains lackluster and gasoline stocks are still above the five-year average, which will cap gains in crude and gasoline prices,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics told Reuters.

Prior to the EIA data release, Brent was up 1.9 per cent and WTI was 2.4 per cent higher.

Those gains were pared as investors weighed OPEC suggestions that the oil market will still be in surplus in 2018.

On Tuesday, OPEC data showed cartel production rose last month.  The group expects the world’s demand for its crude will fall  next year as rivals pump more crude, likely resulting in a market surplus next year.

According to OPEC, the global demand for its crude will be down 60,000 barrels per day (b/d) next year to 32.20 million b/d.

Reuters reports OPEC Secretary General Mohammed Barkindo told an industry conference in Istanbul “We remain very optimistic … (about) helping the market to rebalance itself.”

In August, Saudi Arabia is expected to reduce its crude exports by over 600,000 b/d, according to a Reuters source.