Oil prices extend gains as United States crude inventory falls

Ivan Schwartz
March 22, 2018

Crude oil futures continued to rise Wednesday morning after industry data showed a surprise drawdown in U.S. oil inventories.

Brent crude, the global benchmark, was up almost 1% at $66.69 a barrel on London's Intercontinental Exchange. West Texas Intermediate, the US benchmark for the price of oil, was up 0.56 percent to $61.30 per barrel.

A widening discount of WTI to Brent crude makes it more attractive for foreign refiners to process US oil.

In a sign of healthy demand, US crude stocks fell by 2.7 million barrels in the week ended March 16 to 425.3 million, the American Petroleum Institute said on Tuesday.

Last week the EIA surprised markets by reporting a heavy build of 5 million barrels. "A few things happened", said Jim Ritterbusch, president of Ritterbusch and Associates, referring to the data released by the EIA.

"While there is no peak oil demand in sight, the pace of growth will slow down to 1 million barrels per day by 2023 after expanding by 1.4 million barrels per day in 2018", the IEA's report read.

Only Russia produces more, at about 11-million barrels a day, although USA output is expected to overtake Russia's later this year as well. "And exports were up slightly", he said.

"Crude oil prices can move on a range of factors - and the market is typically very susceptible to shocks from geopolitical turmoil - but in and of themselves, higher crude inventories (that is, oil sitting around waiting to be used) reflect higher supplies and may imply downward price pressure (or, perhaps more accurately, a lack of upward price pressure)", wrote E*TRADE.

A falling dollar versus a basket of other currencies makes commodities cheaper for holders of other currencies since they have to spend less to buy the same amount of the commodity.

LaSalle's Willson to sign with Lions
Some love the move and some hate the move but regardless of how you feel, Eric Ebron is no longer on the Detroit Lions roster. According to National Football League insider Adam Caplan, it is a 1-year deal worth $2.5 million plus incentives.

Rabada cleared to play for South Africa
When the conversation moved into the more familiar pre-match territory, Smith stopped short of confirming an unchanged XI. In addition to Starc, all-rounder Mitchell Marsh was passed fit after suffering a groin strain in Port Elizabeth.

Expelled Russian diplomats leave embassy in London
Stoltenberg said that "Russia's response so far has demonstrated a clear disregard for worldwide peace and security". Brit cops said Friday that he died from compression to the neck and opened a murder investigation.

Soaring U.S. output, as well as rising output in Canada and Brazil, is undermining efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation to curb supplies and bolster prices.

Oil prices rose on Wednesday, lifted by tensions in the Middle East and healthy demand, although rising us output continued to weigh on markets.

In February, PDVSA and its joint ventures sent 21 cargoes to the United States - half the number it exported in recent years - with a total of 378,643 barrels per day (bpd) of crude, according to Reuters' Trade Flows data.

"So even though you do see signs that the market is lax on the physical side, do you go aggressively bearish when you have the potential for something happening between the USA and Iran?".

Bearish concerns have largely been fueld by surging US crude output.

Looking at U.S. crude oil stocks, the most recent EIA figures (March 4) showed rising crude oil stocks and falling gasoline inventories.

"So far, the market is sort of ignoring the increase in production", said Ritterbusch.

Thanks to the high drilling activity, US crude oil production has risen by more than a fifth since mid-2016, to 10.38 million barrels per day (bpd), pushing it past top exporter Saudi Arabia.

Other reports by GizPress

Discuss This Article

FOLLOW OUR NEWSPAPER