Published: Thu, September 14, 2017
Business | By Max Garcia

Oil price rises as IEA forecast overshadows United States crude build

Oil price rises as IEA forecast overshadows United States crude build

October West Texas Intermediate crude for October delivery added $1.07, or 2.2%, to settle at $49.30 a barrel on the New York Mercantile Exchange, for the highest finish since August 9.

Brent for November settlement slid 27 cents to $53.57 a barrel on the London-based ICE Futures Europe exchange after gaining 6 cents on Monday.

Crude oil prices rose on Wednesday after the International Energy Agency (IEA) said a global surplus of crude was starting to shrink, even though USA data showed another big increase in domestic inventories due to Hurricane Harvey.

At the same time, crude inventories climbed by 5.89 million barrels to 468.2 million, while refinery utilisation sank. That's below the forecast for a rise of 10.1 million barrels by analysts surveyed by S&P Global Platts.

The numbers show that "Hurricane Harvey's disruptive influence continues", said Smith, director of commodity research at ClipperData.

The energy sector strengthened while the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, was 1.7% higher and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, advanced 1.4%.

Source U.S. Energy Information Administration Gasoline and Diesel Fuel Update
Source U.S. Energy Information Administration Gasoline and Diesel Fuel Update

"Demand growth continues to be stronger than expected, particularly in Europe and the U.S.", the IEA said, raising its 2017 global oil demand growth estimate to 1.6 million barrels per day from 1.5 million bpd. As Harvey led to widespread flooding, refineries such as Royal Dutch Shell Plc's Deer Park, Texas plant and Exxon Mobil Corp.'s Baytown complex shut and Magellan Midstream Partners LP suspended its inbound and outbound refined products and crude pipeline transportation services in the Houston area. "On the flip side, a lack of refining activity means we have seen some hefty draws to the products".

It was the first fall in global production in four months.

Phil Flynn, senior market analyst at Price Futures Group, said the weekly drop was the largest in history and that the storms were to blame.

"OECD commercial stocks were unchanged in July at 3.016 billion barrels, when they normally increase", the IEA said.

On Nymex, October gasoline fell about a penny to $1.647 a gallon, while October heating oil added 2.8 cents, or 1.6%, to $1.769 a gallon.

The price difference between the two benchmarks increased to almost $5.46 in favour of Brent crude as USA oil market continues to remain affected due to Hurricanes Harvey and Irma. The 12 OPEC nations engaged in production cuts reduced their output by 109,000 barrels a day last month, according to a person familiar with the matter. The assessment echoed a publication by the Organization of Petroleum Exporting Countries, which on Tuesday forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market. Prices rose 59 cents to $48.07 on Monday.

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