Oil prices inch up on surprise drawdown in US crude stockpiles

Marco Green
October 19, 2018

Brent crude rose 63 cents, or 0.8 per cent, to settle at $81.41 a barrel, while West Texas Intermediate (WTI) crude ended the session up 14 cents at $71.92 a barrel.

US crude stocks rose 6.5 million barrels last week, the fourth straight weekly build, nearly triple what analysts had forecast, the US Energy Information Administration said on Wednesday. Meanwhile, responding to U.S. President Donald Trump's call for lower oil prices, "The oil market is suffering from short supply and this can not be resolved by words".

"The US may have to go ahead with sanctions on Saudi Arabia, which could push prices higher, but Russian Federation and other producers are set to increase supplies". Meanwhile, Donald Trump said in a tweet that the Saudi crown prince "totally denied any knowledge" of what happened to dissident Jamal Khashoggi, as the USA president faces rising pressure to act against the regime.

Inventory data from the U.S. Energy Department's Energy Information Administration is due at 1430 GMT on Wednesday.

When asked whether Russian Federation and Saudi Arabia had made a backroom deal to increase oil production, MbS was more tight-lipped, saying only that Saudi Arabia was "ready to supply any demand and any disappearing from Iran".

"Prices are rising today as the unexpected decline in USA inventory data comes at a time when tensions between the US and Saudi Arabia are boiling", according to Stephen Innes, Singapore-based head of trading for Asia Pacific at Oanda Corp.

Jim Ritterbusch, president of Ritterbusch and Associates, said Saudi Arabia could cut as much as 500,000 barrels per day of crude production "as a warning shot should the US opt to impose any type of sanction in response to the Khashoggi developments". Meanwhile, geopolitical tensions continue to hound sentiment, with the trade war ongoing between the US and China.

"We think that one of the major factors that is leading to a scaling back of long positions is a reappraisal of short-term fundamentals by investors", Standard Chartered analysts said in a note.

Refusing to say if India has sought a waiver of sanctions from the United States as to continue purchasing crude oil from Iran, Oil Minister Dharmendra Pradhan said he has articulated the country's position on importing oil from the Persian Gulf nation in November and "there is nothing new to repeat". Gazpromneft earlier today said it was no longer restricting its oil output, although it doubtful that either Russian Federation or Saudi Arabia can reclaim their top spots.

Earlier in the day, Reuters reported that Mohammed Barkindo, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said that India was projected to see the largest additional oil demand (3.7 percent per annum) and the fastest growth in the period to 2040.

Other reports by Click Lancashire

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