Oil prices decline as USA crude stocks soar

Gladys Abbott
September 14, 2017

The American Petroleum Institute had reported late Tuesday (http://www.marketwatch.com/story/api-data-show-rise-in-us-crude-supply-drop-in-gasoline-stockpiles-sources-2017-09-12) an increase of 6.2 million barrels.

On Nymex, October gasoline fell about a penny to $1.647 a gallon, while October heating oil added 2.8 cents, or 1.6%, to $1.769 a gallon.

In its monthly oil market report the OPEC's research arm said better-than-expected numbers from industrialised nations in the West and China has led it to raise its oil demand growth estimate for 2017 to 1.42 million barrels a day (b/).

The global oil surplus is beginning to shrink due to stronger-than-expected European and USA demand growth, as well as production declines in OPEC and non-OPEC countries, the International Energy Agency said on Wednesday. OPEC supply fell by 210,000 barrels, marking the first decline in five months.

Compliance with the cartel's deal to reduce production was 94 percent in August, up from a revised 85 per cent in July.

Phil Flynn, senior market analyst at Price Futures Group, said the weekly drop was the largest in history and that the storms were to blame.

There are a lot of question marks about 2018, but in many ways, the IEA just published one of its more bullish reports in quite a while.

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October West Texas Intermediate crude for October delivery added $1.07, or 2.2%, to settle at $49.30 a barrel on the New York Mercantile Exchange, for the highest finish since August 9. Total volume traded was about 13% above the 100-day average.

Brent for November settlement increased 58 cents to $54.85 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $4.77 to WTI.

Brent's large premium over the U.S. benchmark "is the most telling signal that United States crude oil markets need more time to return to normal in the wake of Hurricane Harvey", IHS Markit Ltd said in a note yesterday.

As well, weekly data from the United States government's Energy Information Administration (EIA) revealed a smaller-than-expected rise in crude supplies, a hefty drop in gasoline (petrol) stockpiles and a jump in domestic output as production in the Gulf of Mexico and along the Texas coast around Houston recovered in the wake of Hurricane Harvey.

Refinery operations are largely dependent on a supply of crude oil and feedstocks, electricity, safe working conditions, workforce availability, and outlets for production.

Early Wednesday, the U.S. Energy Information Administration said domestic crude supplies climbed (http://www.marketwatch.com/story/eia-reports-smaller-than-expected-rise-in-us-crude-supplies-output-climbs-2017-09-13) by 5.9 million barrels for the week ended September 8. Nigeria said overnight it would continue to boost production and would not join the OPEC cuts. "We expect crude prices to be stuck in somewhat of a holding pattern until we have Gulf Coast refineries brought back to full capacity".

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