Oil prices rose on Wednesday even after the US Energy Information Administration reported a rise in US crude stocks by 5.8 million barrels last week and rising US production that hit a record-breaking 11 million b/d. Anadarko photo.
Oil prices up on demand for gasoline and distillates
Oil prices rose slightly on Wednesday despite US government data showing a surprise increase in crude stocks and a record-high production rate of 11 million barrels per day.
By 2:33 p.m., EDT, benchmark Brent crude futures were up 81 cents to $72.97/barrel after hitting a session low of $71.19/barrel, the lowest since April 7. US West Texas Intermediate futures climbed 61 cents to $67.77/barrel.
The Canadian Crude Index rose 62 cents to $40.96.
Data from the US Energy Information Administration showed US crude stocks had increased by 5.8 million barrels last week. Analysts polled by Reuters prior to the data release had expected a decline of 3.5 million barrels last week.
After the EIA data was published, crude futures fell, however, oil prices edged higher as the session continued on more supportive points in the EIA report, including a larger-than-expected draw on gasoline stockpiles.
According to the EIA, gasoline inventories fell by 3.2 million barrels and distillate stocks, including diesel and heating oil, dropped by 371,000 barrels.
“Even though the overall crude number was bearish, the gasoline numbers and distillate numbers were pretty bullish,” Phil Flynn, an analyst at Price Futures Group told Reuters. “We’re back to worrying about a tight market.”
Over the past week, oil prices dropped about 10 per cent after Saudi Arabia, other OPEC members and Russia boosted their production and as Libyan production stabilized.
“The correction in the oil price represents something of a convergence between fundamentals and physical realities,” David Reid, lead crude market analyst at consultancy JBC Energy told Reuters.
“We expect a fairly rapid lengthening in the (global oil supply) balance,” Reid added.
The ongoing trade dispute between the United States and China is concerning investors who worry that the escalating tensions will drag down the global economy and negatively impact energy demand, according to BMI Investments.
“The economic outlook is broadly positive, but a number of headwinds are emerging, not least a stronger dollar, rising inflationary pressures and tightening liquidity,” BMI said. “Slowing trade growth will weigh on physical demand for oil.”
As well, Kansas City Federal Reserve Bank President Esther George told Reuters that even if the recently imposed tariffs are too small to affect significant repercussions, uncertainty over President Trump’s trade policy could slow the economy.
George added that trade policy was a “significant” downside risk to the outlook for economic growth.