Oil prices down, gasoline, heating oil futures up
Oil prices fell slightly on Wednesday after data from the US Energy Information Administration showed a surprise increase in crude inventories last week.
Brent crude dipped 23 cents to $57.94/barrel by 12:41 p.m. EDT and US WTI fell by 48 cents to $51.99/barrel. The Canadian Crude Index fell by 89 cents to $38.63.
Prices fell despite comments from Saudi Arabia’s Energy Minister Khalid al-Falih on Tuesday. Falih said the kingdom was determined to end the three-year crude supply glut and that Saudi Arabia may look at extending its output cuts once the OPEC supply cut pact expires.
“We are determined to do whatever it takes to bring global inventories down to the normal level which we say is the five-year average,” Saudi Energy Minister Khalid al-Falih said during a conference in Riyadh on Tuesday.
According to the EIA, crude inventories in the US rose by 856,000 barrels in the week ending Oct. 20. Analysts had forecast a drop of 2.6 million barrels after production went back online in the wake of Hurricane Nate, but US crude imports had also risen.
Gasoline and heating oil futures increased after EIA data showed substantial drawdowns in inventories heading into the winter fuel season. Both gasoline and distillate inventories fell by over 5 million barrels and refinery utilization rates jumped by 3.3 per cent.
“Product stocks fell sharply despite higher processing, which points to very robust demand,” Carsten Fritsch, oil analyst at Commerzbank AG told Reuters.
Benchmark Brent is stuck below $60/barrel even though global inventories are falling and demand is rising. Many analysts are concerned that the crude glut may return once the OPEC supply cut deal ends in March.
OPEC is meeting in Vienna next month where they will consider extending the agreement, which has seen participants cut their output by about 1.8 million barrels per day (b/d).
In Iraq, Kurdish authorities offered to suspend their drive for independence. Recently, strife between the Iraqi government and Kurdish independence seekers has impacted oil output from the Kurdistan region in northern Iraq.
Also impacting oil prices was data showing US production has rebounded, hitting 9.5 million b/d last week. In the past four weeks, US crude exports averaged 1.7 million b/d, the highest ever.
“Saudi Arabia’s determination to rebalance the market, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices,” Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics told Reuters.
“However, rising oil production in the US and persistently high exports from the country will be the key bearish factors.”
