Oil prices up as crude stocks fall by 3.3 million barrels
Oil prices rose over one per cent on Wednesday after the United States Energy Information Administration reported US crude stocks fell by over 3 million barrels last week.
Brent crude futures were up by 57 cents to $52.54/barrel by 12:44 p.m. EDT and US WTI rose by 48 cents to $48.31/barrel.
According to the US EIA, crude inventories fell 3.3 million barrels last week, slightly lower than analysts’ expectations of a drop of 3.5 million barrels. Crude stocks at the Cushing, Oklahoma delivery hub were down by 503,000 barrels.
“Oil inventories continue their downward trend despite a significant increase in crude oil imports this week,” Andrew Lipow, president of Lipow Oil Associates told Reuters.
Despite reports showing US crude stocks are down 75 million barrels since March, the market remains skeptical about the possible rebalancing of the oil market.
“It continues to wait to see more confirmation from around the world that inventories are indeed declining,” Lipow said.
Off-and-on production from Libya’s Sharara oilfield continued as the play remained shut on Wednesday after restarting at least once on Tuesday, but there were conflicting reports on the status of the largest oilfield in Libya.
“(The) flood of news reports makes it clear that the situation in Libya is still chaotic and that conditions in the country are still far from normal,” Reuters reports Commerzbank analysts wrote.
In recent weeks, Sharara hit output of 280,000 barrels per day (b/d), but was shut down this week due to a pipeline blockade. The field produced over over one-quarter of Libya’s total output in June of just over 1 million b/d.
Two October events could shock oil markets, according to Helima Croft, global head of commodity strategy at RBC Capital Markets.
“[Venezuela’s state-owned PDVSA] have $3.5 billion in national oil company debt coming due in October-November. If they default, that could be significant for Venezuela’s production outlook,” Croft told CNBC’s “Squawk on the Street” on Tuesday.
“The math simply does not work on PDVSA staying solvent” without help from Russia and China, she said. “So we think this default is a clear and present danger.”
The second shock could be the abandonment of the Iran nuclear agreement, which lifted sanctions on Iran.
