Oil Hovers Near Three-Year Highs as Investors Parse Supply Data
January 18 2018 - 3:37PM
Dow Jones News
By Stephanie Yang
Oil prices pared losses on Thursday, as government data showing
a larger-than-expected reduction in stockpiles outweighed
increasing output from major oil producers.
Light, sweet crude for February delivery settled down 2 cents at
$63.95 a barrel on the New York Mercantile Exchange, after
fluctuating between gains and losses throughout the session. Brent,
the global benchmark, edged down 7 cents, or 0.1%, to $69.31.
On Thursday, the U.S. Energy Information Administration reported
that the amount of crude oil in storage declined by 6.9 million
barrels in the week ended Jan. 12, exceeding analyst expectations
on average for a 2.3 million barrel draw.
The drop also outpaced the estimated 5.1-million barrel decrease
from the American Petroleum Institute, an industry group.
The latest figures reinforced optimism that a global glut that
weighed on prices for three years is finally diminishing, a
sentiment that has in recent weeks boosted crude prices to the
highest level since 2014.
"That becomes supportive to the energy complex and energy
prices," said Tony Headrick, an analyst with CHS Hedging. In
addition, sizable draws from Cushing, Okla. a key delivery and
pricing point for U.S. oil, "are a blatant bullish consideration,"
he said.
However, concerns about climbing production muted the market's
reaction to the bullish inventory data, analysts said.
In a monthly market report, the Organization of the Petroleum
Exporting Countries said Thursday that its crude production rose by
42,000 barrels a day in December, to average 32.42 million barrels
a day.
OPEC, along with several major producers outside the cartel
including Russia, agreed in November to extend efforts to limit
output, in an attempt to reduce excess supplies and bring global
stockpiles back down to the five-year average level.
Meanwhile, U.S. production rose by 258,000 barrels a day to 9.75
million in the week ended Friday.
"They continue to up the ante and up the game, they continue to
produce more and more and more," said Donald Morton, vice president
at Herbert J. Sims & Co., who runs an energy trading desk.
But as inventories have declined and demand for fuel has grown,
the threat of U.S. shale has become less pronounced.
"To say that there has been a paradigm shift in sentiment in the
oil market would be an understatement," Energy Aspects analysts
wrote in a note this week. "The narrative has now shifted from
infinite U.S. shale production at $55 to how much does shale need
to grow by to fill the gap created by record demand growth."
Stocks of distillates, including diesel and heating oil, fell by
3.9 million barrels last week, exceeding analyst expectations for a
100,000-barrel build. Gasoline stockpiles rose by 3.6 million
barrels, compared with estimates for a 2.6 million-barrel
increase.
Gasoline futures climbed 1.4% to $1.8835 a gallon, and diesel
futures fell 0.4% to $2.0617 a gallon.
Christopher Alessi contributed to this article.
Write to Stephanie Yang at stephanie.yang@wsj.com
(END) Dow Jones Newswires
January 18, 2018 15:22 ET (20:22 GMT)
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