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Oil up after petrol stock draw, but market bloated
[NEW YORK] Oil prices held onto gains Thursday after an unexpected draw in US petrol inventories pointed to higher demand in the world's biggest oil market, although bloated crude supplies meant that fuel markets remain under pressure.
Benchmark Brent crude was up 35 cents a barrel at US$55.47 per barrel by 11.30 Eastern (16.30 GMT). US light crude was 55 cents higher at US$52.89 a barrel. "I think the market is frozen," said Dominick Chirichella, senior partner at the Energy Management Institute.
He said that while the US petrol stock draw was interesting, it was insufficient to knock the market out of its range-bound trade, limited between production cuts from Opec and brimming US crude stockpiles.
"If we continue to see a decent compliance level in the 85 to 95 per cent range from Opec and we do see inventories cleaning up in the US we may get another leg up," Chirichella said.
The US Energy Information Administration (EIA) said on Wednesday petrol inventories fell by 869,000 barrels last week to 256.2 million barrels, versus analyst expectations for a 1.1 million-barrel gain.
The fall in petrol stocks suggested US consumption was stronger than expected, and may be healthy enough to support prices at time when most fuel oil markets are very well stocked.
"US gasoline draws are supporting prices today," said Tamas Varga, senior analyst at London brokerage PVM Oil Associates. "They are an indication of stronger US demand." The EIA report also said US commercial crude inventories rose by 13.8 million barrels to 508.6 million barrels, well above analysts' forecasts.
US bank Goldman Sachs said high fuel inventories and rising US crude production meant oil markets would be over-supplied for some time, but that they would drain gradually.
"We do not view the recent excess US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness," the bank said in a note to clients. "The draws that we expect will start from a high base," the bank said. "
US production has also rebounded ... and we view the faster shale rebound as creating downside risk to our 2018 WTI price forecast of US$55 per barrel, but not to our expectation that the global oil market will shift into deficit in 1H17."
High oil inventories have been undermining efforts by the Organization of the Petroleum Exporting Countries and other producers including Russia to tighten the market by cutting production.
Opec and other big exporters have agreed to trim output by almost 1.8 million bpd during the first half of this year in order to prop up prices and rebalance the market.