ibusinesslines.com
ibusinesslines.com December 14, 2018


Crude Oil Rallies After API Shocker

13 January 2018, 12:47 | Kelvin Horton

Global Look Press

The world’s most expensive oil

The American Petroleum Institute (API) reported a staggeringly large draw of 11.19 million barrels of United States crude oil inventories for the week ending January 5.

The main question for USA gasoline stocks will be whether last week's storm that brought ice and snow up and down the East Coast dampened demand, as expected with drivers trying to stay off the roads.

Iranian Oil Minister Bijan Zangeneh said Tuesday that prices this year were supported in part by OPEC commitments, but also by demand strains from severe winter weather.

Analysts said his remarks alleviated market concerns about a wind-down of the OPEC-led deal to reduce production.

West Texas Intermediate, the US benchmark, has been trading over $60 per barrel for several weeks now.

Nevertheless, higher oil prices will make investment into US shale oil more attractive.

Brent crude futures traded 55 cents lower at $68.71 a barrel at 1253 GMT. The session high for the global benchmark was US$69.37, highest since May 2015.


On Dec. 9, the EIA estimated that USA crude oil production could average 10.3 million barrels per day in 2018 - record levels for the United States and roughly 1 million barrels per day higher than estimated 2017 figures.

EIA research shows that US gasoline prices tend to follow the price of the best grades of oil in Europe, more than they follow the price of the best USA crude.

Some of Russia's counterparts in OPEC, namely Iran, had expressed concern that the rally would stimulate USA shale oil production, which has balanced the effort to narrow the gap between supply and demand over the previous year. Also, the dollar fell in a broad sell-off after a report that China was ready to slow or halt its US treasury purchases.

The greenback-denominated commodity has also benefited from weakness in the dollar, which neared a one-week low on Thursday, as it makes oil cheaper to buy for holders of other currencies.

OPEC crude oil production is forecast to increase by 0.2 MMBPD in 2018, partially reflecting the Energy Information Administration's expectation of Libya maintaining relatively high production levels achieved near the end of 2017, according to EIA's just-released Short-Term Energy Outlook (STEO).

At this consumption level, a dollar increase in crude price on a permanent basis will increase the oil import bill by roughly Rs 10,000 crore per annum.

"On a fundamental basis, the first half of year is about 1.5 million barrels per day weaker from a demand perspective than the second half of the year", he told CNBC's " on Wednesday.



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