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US crude slips on inventory build, petrol rallies
[NEW YORK] US oil prices slipped on Wednesday after a surprising increase in US crude inventories, while US petrol futures rallied 1 per cent on a sharp falloff in inventories.
Brent crude edged up after top exporter Saudi Arabia reiterated its determination to end a three-year supply glut.
The deep draw in petrol inventories came even as refining output rose, according to data from the US Energy Information Administration. This suggested demand remained strong after the peak US driving season.
Crude inventories rose by 856,000 barrels in the week to Oct 20, the EIA said. Analysts had expected a decrease of 2.6 million barrels. Production rebounded from a falloff due to Hurricane Nate, and imports rose.
Brent crude futures settled up 11 cents at US$58.44 a barrel. US West Texas Intermediate crude dropped 29 cents to US$52.18.
The EIA data showed petrol and distillate inventories both fell by more than 5 million barrels, and refinery utilisation rates rose 3.3 percentage points.
RBOB futures rose 1.1 per cent to US$1.7341 a gallon. Heating oil futures got a brief boost but settled slightly lower.
"Demand has been a little stronger than some people might have anticipated as we pushed out of the driving season, and that's where today's strength is coming from," said Gene McGillian, manager of research at Tradition Energy in Stamford, Conn.
On Tuesday, Saudi Arabian Energy Minister Khalid al-Falih on Tuesday raised the prospect of prolonged output restraint even after the end of an Opec-led pact to cut supplies.
Even as global inventory levels are falling, Brent has remained below US$60 a barrel, partly on concern the crude glut may grow again after March 2018, when the output reduction deal is due to end.
The Organization of the Petroleum Exporting Countries, Russia and other producers have cut oil output by about 1.8 million barrels per day (bpd). Opec's next meeting is on Nov 7 in Vienna, Austria, when they will consider extending the deal.
While other producers cut output, US production rebounded to 9.5 million bpd in the latest week. US crude exports have averaged 1.7 million barrels a day over the past four weeks, the highest ever.
"Saudi Arabia's determination to rebalance the market, together with ongoing geopolitical tensions in the Middle East, will remain supportive of oil prices," said Abhishek Kumar, senior energy analyst at Interfax Energy's Global Gas Analytics in London.
"However, rising oil production in the US and persistently high exports from the country will be the key bearish factors."
Disruptions to exports from Iraq, Opec's second-largest producer, have supported oil. Kurdish authorities on Wednesday offered to suspend their independence drive, but Baghdad said it would continue its offensive to retake Kurdish territory.