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Crude Oil closes at 6-week high as U.S. inventories fall

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July 19th, 2017

Crude Oil futures settled at their highest level in about six weeks Wednesday after U.S. government data showed a sizable decline in U.S. crude stockpiles for a third week in a row.

The August contract for West Texas Intermediate crude US:CLQ7 which expires at Thursday’s settlement, tacked on 72 cents, or 1.6%, to finish at $47.12 a barrel on the New York Mercantile Exchange after trading as high as $47.26. September Brent crude LCOU7, +1.00%  traded on ICE Futures Europe rose 86 cents, or 1.8%, to $49.70 a barrel.

Both WTI and Brent oil settled at their highest levels since June 6, according to FactSet data.

“Over the past 15 weeks, U.S. oil inventories have fallen a good 13 times, and in most cases, the falls were more pronounced than expected,” said Fawad Razaqzada, technical analyst at Forex.com.

“The supply surplus is still there,” with the EIA data showing domestic crude-oil inventories holding ground near their upper half of the average for this time of year, but “the recent trend of destocking is nonetheless encouraging news,” he said.

The EIA reported Wednesday that domestic crude supplies fell by 4.7 million barrels for the week ended July 14. That followed hefty declines in each of the previous two weeks.

The size of the weekly fall topped the forecast for a decline of 3 million barrels by analysts surveyed by S&P Global Platts. The American Petroleum Institute Tuesday reported that U.S. crude stocks had grown by 1.6 million barrels last week.

“The better-than-expected inventory results means that Brent [crude] is staring at $50,” Adrienne Murphy, chief market analyst at AvaTrade, told MarketWatch.

Even so “the oil market is particularly sensitive to bearish news right now [and] less sensitive to bullish readings,” she said.

Gasoline stockpiles also fell by 4.4 million barrels, while distillate stockpiles declined by 2.1 million barrels last week, according to the EIA. But the report also showed a rise of 32,000 barrels per day in total domestic crude output to 9.429 million barrels a day.

“Only a relentless fall in total U.S. storage will hurl oil from this bearish market, but so far we’ve seen stockpiles swell,” said Murphy.

On Nymex, August gasoline RBQ7, -0.49%  added 3.8 cents, or 2.4%, to $1.617 a gallon, while August heating oil HOQ7, +0.20%  rose 4.1 cents, or 2.7%, to $1.551 a gallon. Prices for both petroleum products saw their highest settlements since late May.

August natural gas NGQ17, -2.12%  settled at $3.066 per million British thermal units, down 2.2 cents, or 0.7%, ahead of the EIA’s weekly update on supplies of the commodity due Thursday.

Read: Here are Bank of America’s best contrarian trades for July

The latest petroleum supply report comes ahead of the Organization of the Petroleum Exporting Countries’ ministerial monitoring committee meeting Monday in Russia that’s expected to have some non-OPEC members in attendance. The committee monitors compliance with the OPEC-led output-cut agreement and attendees are expected to discuss the possibility of including two previously exempted OPEC members, Nigeria and Libya, into the pact.

Oil prices had climbed Tuesday, buoyed by a report that said Saudi Arabia is considering a 1 million barrel-a-day cut to its crude exports to offset a rise in output from Libya and Nigeria—two OPEC members who have been exempt from the output-cut agreement.

Saudi Arabia’s reported “efforts to rebalance the rise in Libyan and Nigerian supplies by reducing output by 1 [million barrels] a day is an admirable approach,” said Murphy. “The cartel would ensure investors that they will do ‘whatever it takes’ to revitalize the market, instead of the ‘just about enough’ approach they took…when they simply extended supply curbs.”

 - MarketWatch.



 

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