Oil little changed as Saudi comments offset US output, exports

[NEW YORK] Oil prices were little changed after erasing earlier losses by midday on Thursday as Middle East tensions and Saudi comments about ending a global supply glut offset an unexpected increase in US crude inventories and high US production and exports.

Brent futures were up 13 cents, or 0.2 per cent, at US$58.57 a barrel by 12.45 pm EDT (1645 GMT), while US West Texas Intermediate crude was up 15 cents, or 0.3 per cent at US$52.33 per barrel. Both benchmarks were down by less than 1 per cent earlier Thursday.

Saudi Arabia's energy minister earlier this week reiterated the kingdom's determination to end a global supply glut that has weighed on prices for more than three years.

"Price volatility in the oil market is expected to persist in the run-up to the November Opec meeting. Saudi Arabia's bullish stance, together with ongoing geopolitical tensions in the Middle East, will remain supportive of prices," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.

He was referring to the planned Nov 30 meeting of the Organization of the Petroleum Exporting Countries (Opec).

"However, the market is also mindful of rising oil production in the United States and persistently high exports from the country, which will cap price gains," Mr Kumar noted.

US crude inventories rose by 856,000 barrels last week, US Energy Information Administration (EIA) data showed on Wednesday, versus analysts' forecast for a 2.6 million-barrel draw.

The data also showed that US crude production rose 1.1 million barrels per day (bpd) last week to 9.5 million bpd after a decline due to Hurricane Nate, while US oil exports hit a new record four-week average of 1.7 million bpd.

"We continue to highlight a near record level of crude exports that appears sustainable near 2 (million bpd) through next month due to a widening Brent-WTI spread that pushed above US$6 per barrel resistance in yesterday's trade," Jim Ritterbusch, president of Chicago-based energy advisory firm Ritterbusch & Associates, said in a note.

Brent's premium over WTI WTCLc1-LCOc1 was up 1.5 per cent on Thursday at US$6.35 amidst renewed strength in the global benchmark. Ritterbusch said he expects December Brent to make a run at US$59 by the end of the week.

But higher US supply has been balanced by worries over crude exports from the Middle East.

Crude shipments to Turkey from northern Iraq, the second-largest producer in Opec, have declined after Iraqi government forces took back the city of Kirkuk last week after a Kurdish referendum on independence.

Meanwhile, global oil demand keeps rising.

Southeast Asia's net crude oil imports will more than double to 5.5 million bpd by 2040 as the region adds new refining capacity to meet rising demand while regional oil output falls, according to the International Energy Agency (IEA).

REUTERS