Oil Prices Spike Amid Extremely Large API Crude Oil Draw (USO)

Marco Green
January 13, 2018

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.

"In both 2018 and 2019, EIA expects total global crude oil production to be slightly greater than global consumption, with US crude oil production increasing more than any other country", its latest report read. U.S. gasoline stocks rose 4.1 million barrels, EIA data showed, more than expected, while Singapore average refinery profit margins have fallen below $6 per barrel this month, their lowest seasonal level in five years. Accordingly crude import bill will rise by around USD 1.5 billion for every dollar increase in crude price, the report said.

The market was bolstered modestly by data showing a sharp decline in USA production last week.

US West Texas Intermediate (WTI) crude futures were at $63.53 a barrel at 0144 GMT, 4 cents below their last settlement but still close to a December 2014 high of $63.67 per barrel reached the previous day.

"It's not just USA demand", he said.

But Fatih Birol, head of the International Energy Agency, warned on Friday that while oil prices at $65 to $70 per barrel are good for oil producers now, there is a risk that such a level would encourage more oversupply from US shale drillers.

On top of usual sources of demand, many industrial and commercial customers in the region were asked by their local utilities to switch from natural gas to heating fuel. Pelham junction and tank farm in Pelham, Alabama, U.S., on Monday, Sept. 19, 2016. Analysts had expected a smaller, 2.625-million-barrel build.

"There is no panic", OPEC Secretary-General Mohammad Barkindo told reporters in Abu Dhabi when asked about oil prices at the $70 a barrel level. That compares with an average build of 6 million barrels for the same period from 2013-17.

Bearish signals include a rise in fuel inventories as well as a fall in refined products profits in Asia, which are expected to hamper orders for new feedstock crude.

For the week ending December 29, USA gasoline production decreased 564,000 b/d to 9.682 million b/d, the smallest amount in almost four months. Also, the dollar fell in a broad sell-off after a report that China was ready to slow or halt its USA treasury purchases. Over the last two weeks, USAC gasoline imports averaged 335,000 b/d, compared with 523,000 b/d for the same period from 2013-17.

Gasoline stocks normally increase toward the end of the year.

Traders are watching the surplus on the five-year average in crude oil inventories for signs of balance.

For more information on crude oil, visit the S&P Global Platts website.

Other reports by Click Lancashire

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