After several days of declines, oil prices rose on Wednesday after the US Energy Information Administration reported a larger-than-anticipated drop in US crude inventories. Equinor photo.
Oil prices fell 5 per cent Tuesday
Oil prices were mixed on Wednesday with Brent falling slightly and US West Texas Intermediate making gains after the US Energy Information Administration reported a larger-than-expected decrease in US gasoline and diesel stocks.
By 3:05 p.m., EDT, benchmark Brent crude was down 42 cents to $76.02/barrel. Earlier in the session, Brent had climbed to $77.54/barrel. US West Texas Intermediate rose 28 cents to $66.71/barrel, down from a session high of $67.67/barrel.
While looming US sanctions on Iranian crude exports are underpinning oil prices somewhat, traders remain concerned about the worldwide energy demand outlook as financial and real indicators point to a slowing global economy.
According to the US Energy Information Administration, US gasoline stockpiles fell by 4.8 million barrels to 229.3 million barrels last week, the lowest since Dec. 2017. Distillates, including diesel, were down 2.3 million barrels. Both gasoline and distillate stocks fell more than forecast by analysts prior to the release of the data.
Meanwhile, EIA data also showed an increase of 6.3 million barrels in US crude inventories, much higher than the 3.7 million barrel increase forecast.
“The headline number was a little bearish on crude but with the drop in gasoline supplies and an uptick in refinery runs, the market is holding in there pretty good,” Phil Flynn, analyst at Price Futures Group told Reuters.
Flynn said rising refining utilization signals that maintenance season is almost over and refiners will soon begin to process more diesel and heating oil as winter nears.
International Energy Agency predictions of slower oil-demand growth for 2019 have had an effect on oil prices and weaknesses in equities have also dragged down oil prices.
“Notwithstanding the last few days of selloffs in equities, I need to see a lot more evidence before we can start talking about a slowdown in demand,” Joe McMonigle, senior energy policy analyst at Hedgeye told Reuters.
US sanctions on Iranian crude may still impact the global crude supply as two Reuters’ sources say two Chinese state-owned refiners are not planning to load Iranian crude for November.
Saudi Arabia’s Energy Minister Khalid al-Falih maintains the kingdom will be able to step up to “meet any demand that materializes to ensure customers are satisfied”.
Despite the significant drop in oil prices in recent weeks, some analysts are still predicting a rebound in oil prices before the end of the year.
“We still see Brent reaching $85 per barrel by year-end,” said U.S. bank Morgan Stanley.