Falling US crude stocks, threats to Nigerian fuel infrastructure push oil up

Dianna Christensen
January 18, 2018

The American Petroleum Institute (API) data revealed a 5.121-million-barrel draw of the USA crude oil inventories for the week ending January 12, marking another large draw in weeks.

Brent on Monday hit 70.37 dollars a barrel, its highest since December 2014, which was at the beginning of a three-year oil price slump.

US West Texas Intermediate (WTI) crude futures were at $64.25 a barrel, up 28c or 0.4% from their last settlement. MCX Crude oil futures closed at Rs 4084 per barrel yesterday, flat on the day after hitting highs near Rs 4100 levels. USA shale oil output will increase by a good 111,000 barrels per day (bpd) next month to 10 million bpd, and. will rise to about 11 million bpd by the end of next year. The Brent benchmark was trading up 0.10 percent at 69.45 dollars.

The tighter supplies come on the back of supply cuts by the Organisation of the Petroleum Exporting Countries (Opec) and Russian Federation, who started to withhold production in January past year.

Congo Republic plans to join the Opec oil cartel, the government said, as the former French colony presses ahead with projects that could help it become the third-largest oil producer in sub-Saharan Africa.

"After years of oversupply, the inventories are contracting much faster than the markets had anticipated", said Stephen Innes, Head of trading for Asia/Pacific at futures brokerage Oanda in Singapore.

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On the economic front yesterday, the United States industrial production increased more than expected in December as unseasonably cold weather at the end of the month boosted demand for heating.

Reuters cited Russian Energy Minister Mr Alexander Novak as saying that a global deal to cut oil output led by OPEC and Russia should continue because the market is still not balanced.

Attacks on pipelines and other facilities in 2016 cut Nigeria's crude production from 2.2 million barrels per day (bpd) to near 1 million bpd, the lowest level in at least 30 years.

He said Saudi Arabia's Foreign Minister Adel al-Jubeir had expressed support for the idea during a visit to Brazzaville on January 8.

Petrol stocks rose by 1.8-million barrels while distillate fuels stockpiles, which include diesel and heating oil, climbed by 609,000 barrels, the API data showed.

Despite this, traders said prices were unlikely to fall far due to risks to supply disruptions.

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