Oil Ekes Out 3-Week High as U.S. Crude Supplies Drop

MARKETWATCH.COM- Oil futures ended with a minor gain Wednesday, barely notching a three-week high, supported by a fourth straight weekly decline in U.S. crude supplies and escalating tensions in the Middle East.

But pressure from unexpected increases in petroleum-product supplies kept prices in a tight trading range.

November West Texas Intermediate crude added 16 cents, or 0.3%, to settle at $52.04 a barrel on the New York Mercantile Exchange. Prices pulled back from the $52.23 level hit before the supply data, but still logged their highest finish since Sept. 27.

On ICE Futures Europe, Brent crude for December rose 27 cents, or 0.5%, to $58.15 a barrel—for its highest settlement since late September.

The U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 5.7 million barrels for the week ended Oct. 13. That was higher than the forecast for a drop of 3.9 million barrels by analysts surveyed by S&P Global Platts, but below the 7.1 million-barrel decline reported by the American Petroleum Institute late Tuesday.

“Lower offshore domestic production due to Hurricane Nate, strong exports and subdued imports have been offset by refinery runs dropping by a whopping 820,000 [barrels a day],” said Matt Smith, director of commodity research at ClipperData.

He said the market was actually “positioned for a larger draw” and that’s why it pared gains.

Unexpectedly, gasoline stockpiles were up 900,000 barrels for the week, while distillate stockpiles rose by 500,000 barrels, according to the EIA. The S&P Global Platts survey forecast drops of 340,000 barrels for gasoline and 2 million barrels for distillates.

“The size of the crude-supply draw underwhelmed expectations due to refinery maintenance” leading to drop in refinery runs, said Troy Vincent, oil analyst at ClipperData. That “helped offset the 1 [million barrels-per-day] supply shortfall as a result of the hurricane,” which passed through the Gulf earlier this month.

Meanwhile, escalating tensions between Iraq’s central government and the semiautonomous Kurdish region have boosted crude prices in recent days.Kurdistan, which voted almost unanimously to become an independent state in a controversial referendum late last month, exports nearly 600,000 barrels of oil a day.

Kurdish forces ceded control Tuesday of swaths of northern Iraq to Iraqi government forces, who earlier in the week had taken control of the oil-rich Kirkuk province. But Iraq’s oil minister, Jabbar al-Luaibi, told The Wall Street Journal on Tuesday that production from oil fields in Kirkuk was running normally.

Elsewhere, the U.S. will impose fresh sanctions on Iran, limiting its oil export capacity. President Donald Trump last week refused to certify Iran’s compliance with a 2015 international agreement to curb the Islamic Republic’s nuclear program in exchange for economic sanctions relief.

However, Iran’s deputy oil minister, Amir Zamaninia, insisted Tuesday at an oil industry conference in London that Trump’s decision would have “little or no effect on our future plans on the oil industry.”

Olivier Jakob, an oil analyst at consultancy Petromatrix, said he didn’t expect more upside from the existing international tensions.

He said Brent was unlikely to push above $60 a barrel because that level would encourage increased hedging from U.S. shale producers and less compliance among members of the Organization of the Petroleum Exporting Countries with their deal to curb output.

Courtesy: www.marketwatch.com