Oil prices reach 27-month high despite higher US crude stocks, output, exports

Oil prices rise on Saudi comments

Oil prices rose to an over two-year high on Thursday despite government data showing increased US crude stocks, production and exports.  Prices eclipsed near recent highs due to tightening crude markets and Saudi Arabia’s comments on extending the OPEC supply cut agreement.

By the close of Thursday’s session, benchmark Brent was up 86 cents to $59.30/barrel and US WTI rose 46 cents to $52.64/barrel. The Canadian Crude Index held steady at $39.52/barrel.

Oil markets were buoyed by comments from Saudi Arabia’s Energy Minister Khalid al-Falih earlier in the week.  Falih reiterated the kingdom’s pledge to attack the global crude glut that has weighed down oil prices since 2014.

When asked if the Saudis would support extending the OPEC supply cut pact to the end of 2018, Saudi Crown Prince Mohammad bin Salman told Reuters “We are committed to work with all producers, OPEC and non-OPEC countries … We will support anything to stabilise the oil demand and supply.”

According to Reuters, crude oil for immediate lifting has shifted to a premium over later futures prices.  This indicates that crude demand is strong in many of the world’s biggest consuming regions.

“When you couple what Mohammed Bin Salman said along with (Russian President Vladimir) Putin, you have to realize we have two of the largest oil producers basically putting a blessing on an extension of production cuts through the end of 2018,” Rob Thummel, a portfolio manager at Tortoise Capital Advisors told Reuters.

Earlier in the month, Russian President Vladimir Putin said the OPEC deal could be extended to the end of 2018.

Data from the US Energy Information Administration showed US crude stocks had risen by 856,000 barrels last week.  Analysts had forecast a decline of 2.6 million barrels.

EIA data also showed that gasoline and distillates stocks had both fallen by more than 5 million barrels each, prompting a rise in US gasoline and heating oil futures.

US crude production rose by 1.1 million barrels per day (b/d) to 9.5 million b/d last week, after recovering from the aftermath of Hurricane Nate.  US crude exports also hit a new record four-week average of 1.7 million b/d.

Unrest in the Middle East has balanced concerns over increased US output.

After Iraqi government forces took control of Kirkuk, shipments to Turkey from the oil-rich area have dropped.  On Wednesday, however, Kurdish authorities offered to suspend their independence referendum and offered a ceasefire.

International Energy Agency data shows crude demand is forecast to rise in the coming years.

The IEA expects Southeast Asia’s net crude imports will more than double to 5.5 million b/d by 2040 on new refining capacity.  At the same time, regional oil output is forecast to decline.