Oil soars to 3-year high, as U.S. crude stockpiles drop

20 April, 2018, 01:52 | Author: Clarence Schmidt
  • Image oil prices BLOOMBERG

US crude oil inventories fell 1.071 million barrels to 427.567 million barrels for the week ended April 13, according to data from the US Energy Information Administration on Wednesday.

Crude rose to its highest level since 2014 in NY as the drop in USA inventories reported by an industry group helped to sustain a rally spurred by geopolitical risks. US crude and gasoline inventories fell last week, the American Petroleum Institute was said to report April 17, in contrast to forecasts for a build in USA government data later.

OPEC wants to lure more producers to join the output-reduction deal, U.A.E. Energy Minister Suhail Al Mazrouei said in a Bloomberg Television interview.

CNBC reported that Citigroup analysts raised their forecast for oil prices for this year and next due to rising demand and the potential for supply losses from Venezuela and Iran.

Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts.

The total global supply controlled by OPEC, with Saudi Arabia as its de facto leader, has dropped to 40% in recent years, mainly due to the expansion of U.S. drilling.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for May delivery traded up about 1.9%, at around $67.76 a barrel, and it rose to around $68.29 (up about 2.7%) shortly after the report's release.

The deal, which runs through the end of this year, has almost shrunk global oil stockpiles to their five-year average. For the same period, analysts expected crude inventories to increase by 625,000 barrels and gasoline inventories to drop by 1.9 million barrels.

USA gasoline demand surged to a record high of 9.9 MMbbl a day before the summer driving season when consumption typically peaks. Total motor gasoline supplied (the agency's proxy for demand) averaged 9.4 million barrels a day for the past four weeks, up about 0.7% compared with the same period a year ago.

If Mr Trump chooses to tear up the agreement, expect a substantial hike in tensions between the world's third and fifth largest oil producers and a resultant hike in hydrocarbon prices.

On Nymex, May gasoline rose 1.3% to $2.068 a gallon, while May heating oil gained 1.7% to $2.091 a gallon. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the US could prompt more upside for oil this year.


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