Home Business News Oil prices settle at a nearly 2-week high as US supplies fall more than expected

Oil prices settle at a nearly 2-week high as US supplies fall more than expected

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Oil prices climbed on Wednesday, to settle at their highest in almost two weeks, after a U.S. government report revealed a bigger-than-expected decline in domestic crude supplies, which was the largest one-week drop since the end of March.

Price gains for oil, however, were limited as the Energy Information Administration report Wednesday also showed a sizable weekly climb in total U.S. crude production and recent data offered evidence of a pickup in output from the Organization of the Petroleum Exporting Countries.

U.S. benchmark July West Texas Intermediate crude

CLN8, +0.39%

rose 28 cents, or 0.4%, to settle at $66.64 a barrel on the New York Mercantile Exchange. That was the highest finish for the contract since May 31. August Brent crude

LCOQ8, +0.84%

the global benchmark, rose 86 cents, or 1.1%, to $76.74 a barrel on ICE Futures Europe.

The U.S. Energy Information Administration reported Wednesday that crude supplies fell by 4.1 million barrels for the week ended June 8. That was the biggest one-week drop since the 4.6 million-barrel decline reported for the week ending March 30. Analysts surveyed by S&P Global Platts had forecast a decline of 2.6 million barrels, while the American Petroleum Institute on Tuesday reported a climb of 833,000 barrels.

“Refinery runs at their highest level for the year—and above year-ago levels for the first time since mid-April—have encouraged a solid, yet seasonal draw to crude stocks, with additional bullish hues added to the report by draws to both gasoline and distillates,” said Matt Smith director of commodity research at ClipperData.

“On the demand side of the picture, total products supplied showed a return to form, while on the supply side, domestic production continues to reflect a rampant rise,” he said. Total domestic crude production climbed by 100,000 barrels a day to a fresh weekly record of 10.9 million barrels a day, the EIA report showed.

The 100,000 barrel-a-day increase was more than double the 2018 average weekly increase, according to Tyler Richey, co-editor of the Sevens Report. “If the pace of U.S. oil production growth begins to accelerate again in the coming weeks, that could mean the end of the 2018 oil rally and ultimately, a full-on trend reversal in the oil market.”

Gasoline stockpiles declined by 2.3 million barrels for the week, while distillate stockpiles fell 2.1 million barrels, according to the EIA. The S&P Global Platts survey forecast a supply rise of 200,000 barrels for gasoline, and expected distillate stocks to be unchanged.

On Nymex, July gasoline

RBN8, +1.44%

climbed by 1.7% to $2.125 a gallon, while July heating oil

HON8, +0.80%

tacked on 1.1% to $2.185 a gallon.

July natural gas

NGN18, +0.65%

settled at $2.963 per million British thermal units, up 0.8%, a day ahead of an EIA update on supplies of the fuel.

Also Wednesday, a monthly report from Paris-based International Energy Agency said that the group expects crude demand to grow by 1.4 million barrels a day in 2019.

“Together with strong economic growth, the development of the petrochemical industry world-wide will underpin growth in oil demand,” the report read.

The IEA also cautioned that oil production from regions outside of the remit of OPEC, notably in the U.S., was set to increase. However, the organization said it expected projections for non-OPEC output to slow slightly next year to 1.7 million barrels a day, compared with expectations for 2 million barrels a day this year.

The report comes after a separate monthly report from OPEC Tuesday that showed member increased by 35,000 barrels a day in May, month-on-month, to average 31.87 million barrels a day.

A gathering of OPEC members is set for June 22. The meeting could determine the outlook for production curbs.

Tariq Zahir, managing member at Tyche Capital Advisors, said he expects “to see a production increase from OPEC members” and questions over the size of that raise have “kept the bulls from pushing prices higher at this point.”

“The 500-pound gorilla is what Russia and Saudi Arabia are going to decide—if and how much production could be put back on the market,” he said.

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