Oil rallies Wednesday as drop in domestic crude supplies, hurricane fears lift U.S. prices past $70
By Mayra P. Saefong
Petroleumworld 09 12 2018
Oil futures settled higher Wednesday, as a hefty decline in domestic crude supplies and uncertainty tied to the energy impact from Hurricane Florence combined to lift U.S. prices past $70 a barrel.
The global benchmark crude price, meanwhile, touched a high above $80 a barrel—levels it hasn't settled at since December 2014.
October futures on West Texas Intermediate crude CLV8, -0.23% the U.S. benchmark, rose $1.12, or 1.6%, to settle at $70.37 a barrel. Prices based on the front-month contracts marked the highest settlement since July 20, according to Dow Jones Market Data. November Brent LCOX8, +0.87% gained 68 cents, or 0.9%, to end $79.74 a barrel on ICE Futures Europe after tapping a high of $80.13. The settlement for the global benchmark was the highest since May 23.
The threat of Florence to the Carolinas and Virginia increased in recent days as the storm has grown over the Atlantic, prompting evacuation orders for more than 1 million people ahead of landfall for the major hurricane, which is expected to approach the coast of the Carolinas on Thursday.
Concerns about the impending storm and expected disruptions to supply have underpinned recent crude-price gains. Evacuations ahead of the hurricane has caused a spike in gasoline, with some stations in the Carolinas running short of fuel, according to GasBuddy.
Analysts have also voiced concerns that the storm may cause disruptions to the flow of fuel through the key Colonial Pipeline, which moves gasoline and diesel from Houston through states in the Southeast, including the Carolinas, to Linden, N.J.
However, oil and natural-gas production in the Gulf of Mexico is far from Florence's path and the market expects to see a slowdown in energy demand from power outages and flooding in the aftermath of the storm. Meanwhile, a weather disturbance that may turn into a tropical depression Thursday lurks in the Gulf of Mexico.
Data from the Energy Information Administration Wednesday revealed that domestic crude supplies fell by 5.3 million barrels for the week ended Sept. 7. Analysts surveyed by S&P Global Platts had forecast a fall of 2.7 million barrels, while the American Petroleum Institute on Tuesday reported a drop of 8.6 million barrels.
“A solid draw to crude inventories this week was the result of a counter-seasonal increase in refining activity—at a point when we should be tumbling into fall maintenance,” said Matt Smith, director of commodity research at ClipperData.
U.S. crude production eased back by 100,000 barrels last week to 10.9 million barrels a day, the EIA said. The data followed a monthly report Tuesday from the agency that cut the forecast for 2018 and 2019 output.
“The idea that U.S. oil production will fall into the end of the year not only removes one of the notable headwinds on oil in 2018, it will now act as a tailwind for the energy markets,” said Tyler Richey, co-editor of the Sevens Report.
Gasoline stockpiles rose 1.3 million barrels for the week, while distillate stockpiles climbed by 6.2 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for unchanged gasoline supplies, while distillates were forecast to rise by 2.3 million barrels.
On Nymex, October gasoline RBV8, -0.06% rose 1% to $2.035 a gallon and October heating HOV8, +0.04% added nearly 0.3% to $2.258 a gallon.
October natural gas NGV18, -0.28% ended at $2.829 per million British thermal units, less than 0.05% higher.
Oil traders also sifted through monthly data from the Organization of the Petroleum Exporting Countries, or OPEC, which showed that members boosted total output in August , evidence the cartel is sticking to a decision earlier this year to pump more crude while staying in line with an agreement with other major producers to curb overall output.
The increase comes ahead of renewed U.S. sanctions on Iran that take full effect in November and are expected to sharply curtail exports by the Middle East nation.
Market participants also have closely watched supplies from Middle Eastern oil producers Libya and Iraq. Islamic State claimed responsibility for an attack at Libya's main oil company headquarters and said oil fields in the country are a “legitimate target,” according to a report from Bloomberg .
Worries over the impact of an escalating trade conflict between the world's two largest economies also have pressured overseas markets in recent months. The Wall Street Journal reported Wednesday, however, that the U.S. is reaching out to China for a new round of trade talks.
Story by Mayra P. Saefong
from Market Watch.
marketwatch.com 09 12 2018 19:26 GMT
We invite all our readers to share with us
their views and comments about this article.
Write to firstname.lastname@example.org
By using this link, you agree to allow PW
to publish your comments on our letters page.
Any question or suggestions,
please write to: email@example.com
Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8,10 +/ 800x600 pixels