Oil Prices Rise On Huge Draw In Gasoline Stocks

Traders said widening of positions by participants on the back of strong demand in spot market against restricted supplies from growing regions, mainly kept crude palm oil prices higher at futures trade.

Oil prices, which have recently received some support from reports about discussions of another possible extension of the OPEC production cut deal, remained stable following the release of the EIA report, with WTI trading at US$48.75 a barrel and Brent crude at US$54.62 a barrel.

"OECD product stocks were only 35 million barrels above the five-year average at end-July", the IEA said.

According to the IEA, demand grew by 2.3 million barrels per day (bpd), or 2.4 percent, in the second quarter of 2017, prompting the agency to increase its growth estimate for the year to 1.6 million bpd, or 1.7 percent.

Traders also weighed weekly data from the USA government which revealed a smaller-than-expected rise in crude supplies, a hefty drop in gasoline stockpiles and a jump in domestic output as production in the Gulf of Mexico recovered in the wake of disruptions from Hurricane Harvey. Over the last month, crude oil imports averaged about 7.6 million barrels per day, 7.4% below the same month previous year. US distillate stocks fell by 3.2 million barrels.

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On the other hand, the U.S. West Texas Intermediate or WTI CLc1 was also dragged down by the enormous Hurricane pressure and was losing as much as 30 cents at $47.77 per barrel; while the largest local U.S. refinery, Motiva Port Arthur extends shut down after recuperating from the mass effect of Hurricane Harvey and now Irma.

Data from the Energy Information Administration shows a build in US crude inventories last week of 5.9 million barrels, exceeding expectations.

Just over half of all U.S. refinery capacity is located in the U.S. Gulf Coast (defined as Petroleum Administration for Defense District 3).

For months, the oil cartel OPEC has anxious about what it should be doing as its plan to restrict its collective crude production (and hopefully kick off a price rebound) was failing.

"In St. Petersburg we agreed that once Nigeria reaches the 1.8 mln barrel daily oil production level and is able to maintain it for two months or more it will join other OPEC nations", he said. There was also further positive sentiment following the latest IEA monthly report which revised up its demand forecasts. Growth is forecast to average 700,000 b/d in 2017 and almost 1.5 mb/d in 2018 as higher production from Canada and the North Sea offsets weaker United States and Brazilian estimates.

  • Darren Santiago