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Oil prices end higher Wednesday as U.S. crude supplies fall a second week

By Myra P. Saefong / MarketWatch

Petroleumworld 01 16 2019

Oil futures ended higher Wednesday, with U.S. prices staging a last minute, modest turnaround as a U.S. government report revealed a second straight weekly decline in U.S. crude supplies.

An increase in domestic crude output and a hefty weekly rise for gasoline stockpiles had pushed prices lower for much of the trading session.

The Energy Information Administration on Wednesday reported a bigger-than-expected fall in crude inventories, but that decline also came “amid an upward adjustment to the domestic production number—now to the mighty heights of 11.9 million barrels per day,” said Matt Smith, director of commodity research at ClipperData.

The report also showed “emphatic builds to the products—particularly with gasoline, lifting inventories some 6 percent above the five-year average,” Smith said.

Time Crude Oil Feb 2019 2 Jan 4 Jan 8 Jan 10 Jan 14 Jan 16 Jan US:CLG9 $46 $48 $50 $52 $54

West Texas Intermediate crude for February delivery CLG9, +0.40%  rose 20 cents, or 0.4%, to settle at $52.31 a barrel on the New York Mercantile Exchange. That was a modest extension of the more than 3% rise from a day earlier that was fueled by China's move to stimulate its economy.

March Brent crude LCOH9, +1.17% added 68 cents, or 1.1%, to $61.32 a barrel on ICE Futures Europe.

The EIA said domestic crude supplies declined by 2.7 million barrels for the week ended Jan. 11. Analysts polled by S&P Global Platts expected the EIA to report a smaller fall of 250,000 barrels in crude supplies, while the American Petroleum Institute on Tuesday reported a decline of 560,000 barrels.

“Crude [saw] a little bigger draw than expected but, as we saw last week…gasoline showed a much larger build than was expected,” said Tariq Zahir, managing member at Tyche Capital Advisors.

Gasoline stockpiles climbed by 7.5 million barrels last week, while distillate stockpiles rose by 3 million barrels, according to the EIA. The S&P Global Platts survey had shown expectations for supply increases of 2.6 million barrels for gasoline and 900,000 barrels in distillates.

On Nymex, February gasoline RBG9, +0.39%  added 0.3% to $1.416 a gallon, while February heating oil HOG9, +1.13%  rose 1.2% to $1.895 a gallon.

The biggest surprise from the EIA's report Wednesday was in total U.S. production , said Zahir. The EIA reported a weekly rise of 200,000 barrels a day to 11.9 million barrels a day. That's up over 2 million barrels a day from a year ago.

“The increased production in U.S. production is going to be a thorn in the side of Saudi Arabia trying to [keep] the markets from entering a glut, especially at this time of year when demand is lower,” said Zahir. “We feel the U.S. production number, along with the larger-than-expected build in gasoline, will provide weakness in the energy complex as the week goes on.”

Meanwhile, prices for natural-gas continued to see volatile trading, with February natural gas NGG19, -2.74%  giving up earlier gains to lose 3.3% and settle at $3.384 per million British thermal units. It fell 2.5% on Tuesday.

Thursday's EIA storage report is expected to show a net withdrawal in U.S. natural-gas stocks in the 70 billion to 75 billion cubic foot a range, said Doug May, risk manager at Schneider Electric. That would be “only about a third of the normal decline for this time of year as inventories continue to chip away at a storage deficit that lingered throughout 2018.”

Among monthly oil reports, the EIA's short-term energy outlook released Tuesday revealed a 0.8% reduction to the 2019 forecast on Brent crude prices to $60.52. For 2020, the agency sees U.S. output climbing to 12.86 million barrels a day.

OPEC on Thursday is expected to release its monthly oil market report, followed by that of the International Energy Agency on Friday.

Crude prices have risen by more than 20% from annual lows reached at the end of 2018, on signs a global oversupply is being brought into balance, in part because of a production pledge by members of the Organization of the Petroleum Exporting Countries and its allies. December's low was made on back of a 40% price plunge during the fourth quarter of last year, from four-year highs reached as recently as the start of October.


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Reporting by Myra P. Saefong from MarketWatch.

01 16 2019 20:33 GMT

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