API Reports 9.16 Million Barrel Inventory Draw, WTI Oil Price Edges Higher

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Oil futures rose in Asia trading Wednesday as an industry-group report said US crude inventories logged another big drop last week.

West Texas Intermediate settled down $1.23 at a three-week low of $47.59 per barrel, while Brent dropped $1.36 to $50.74 per barrel; not even news of Libya's biggest oil field reducing crude production by more than 30 percent due to security threats and worker tension could alleviate the losses. October Brent crude on London's ICE Futures rose 0.5% to $51.06.

-If the Energy Information Administration's release confirms API's finding, Nymex futures could move back to $50, says OM Financial's Stuart Ive.

Offsetting much of that effort, however, USA oil production has soared by nearly 12% since mid-2016 to 9.42-million barrels a day.

Chinese oil refineries operated in July at their lowest daily rates since September 2016, official data showed on Monday, to ease brimming inventories as state-owned oil giants faced off independents in a retail petrol price war.

Oil prices fell on Monday as a slowdown in Chinese refining raised concerns about demand in the world's second-biggest consumer, while an increase in US drilling capacity could deepen a global supply glut.

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"Crude oil prices failed to hold recent gains, with a nervous market starting to doubt recent falls in inventories", ANZ bank said in a note.

One explanation for this as-yet underwhelming effect on the global oil market has to do with how diligently (or not, as the case may be) petrostates are adhering to the cuts they agreed to. Still, analysts and traders worry that USA output could undermine efforts to cut production.

International Energy Agency (IEA) in its monthly oil market report indicated that it is not just Libya and Nigeria but the participating countries have produced nearly 470,000 barrels of crude per day, beyond the agreed level.

The Organization of Petroleum Exporting Countries and allies including Russian Federation are curtailing oil output in an effort to deplete bloated inventories and drive up the price of crude.

The recent OPEC/non-OPEC capacity cuts have meant that India has had to diversify its crude suppliers, with state-run refiners making purchases of USA crude grades. The American Petroleum Institute is out with industry report this afternoon.

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