Brent crude oil price rose to $49.44 per barrel as a result of a report that showed a bigger weekly draw down on United States of America’s stock of crude inventory than it was earlier forecast. According to crude stock report by The Energy Information Administration (EIA) U.S. crude stocks fell 4.7 million barrels during the week ended July 14 exceeding estimates for a 3.2 million draw.
Following the report Brent futures for September delivery shot up 60 cents, or 1.2 per cent, at $49.44 a barrel. U.S. West Texas Intermediate crude for August rose to 54 cents, or 1.2 per cent, at $46.94 on its second to last day as the front month.
Commenting on the energy market report Andrew Lipow, President of Lipow Oil Associates in Houston said “The report was more good news for the oil industry as inventories declined across the board for crude and products by over 10 million barrels,”.
EIA said distillate stocks decreased 2.1 million barrels and gasoline stocks declined 4.4 million barrels.
U.S. distillates rose by 2.1 per cent and gasoline futures rose 1.5 per cent, briefly boosting the products crack spread a measure of refinery margins, to its highest since November 2016.
The drawdown occurred even as EIA said U.S. production climbed to 9.43 million barrels per day (bpd), its highest since July 2015. Analysts said rising U.S. production has made it harder for OPEC and other producing nations to support prices with their own output cuts.
“U.S. crude output has maintained its upward trajectory despite oil prices remaining below $50 a barrel,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.
He said this “poses serious questions on the effectiveness of the output cut deal agreed upon by OPEC and some non-OPEC countries.” Supplies from the Organisation of the Petroleum Exporting Countries (OPEC) remain high. Rising output from member states Nigeria and Libya have cast doubt on efforts to reduce the crude glut. The head of Libya’s National Oil Corp said the country aims to produce 1.25 million bpd by the end of the year and 1.5 million bpd by the end of 2018. Nigeria and Libya are exempt from a deal between OPEC and other producers, including Russia, to cut production by 1.8 million bpd.
