OIL PARES LOSSES AS INDUSTRY DATA SHOWS UNEXPECTED CRUDE DRAW

FILE PHOTO: Crude oil storage tanks are seen from above at the Cushing oil hub, appearing to run out of space to contain a historic supply glut that hammered prices, in Cushing, Oklahoma, March 24, 2016. REUTERS/Nick Oxford/File Photo

NEW YORK – Oil pared losses after an industry report was said to have shown an unexpected decline in crude inventories.

Prices were little changed in post-settlement trading after the American Petroleum Institute was said to report yesterday that US crude stockpiles slid by 761,000 barrels last week. That would be the first draw since August if confirmed in Energy Information Administration data scheduled to be released on Wednesday. Analysts in a Bloomberg survey were bracing for a 3.1 million-barrel increase in the stockpiles.

“It was a little bit of a shock, but we’ll see what the EIA says tomorrow. Considering all the lingering impacts of Harvey, it would not surprise me to see a deviation of four or five million barrels between the API and the EIA,” Kyle Cooper, director of research at IAF Advisors in Houston, said by telephone. But, “certainly if the EIA confirms this, then you’d probably find quite a bit of support in the market.”

Oil has gained about 10 per cent this month in New York and its global counterpart traded in London reached a two-year high on Monday amid forecasts for rising consumption in the face of output cuts by the Organisation of Petroleum Exporting Countries’ and partners including Russia.

The two benchmarks posted declines Tuesday, yet losses were limited due to OPEC’s continued output restrictions and lingering concerns that Turkey may disrupt Kurdish oil shipments.

“We’re going to go back to watching our inventory reports,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. The supply caps implemented by Opec and allied producers are “working and we’re seeing a tightening in the supply-demand balance.”

West Texas Intermediate for November delivery traded at US$52.10 (RM218.60) a barrel at 4.38pm after settling at US$51.88 on the New York Mercantile Exchange. Total volume traded was about 7 per cent below the 100-day average. Prices surged to US$52.22 on Monday, more than 20 per cent above their most recent low — the classic definition of a bull market.

Brent for November settlement dropped 58 cents to end the session at US$58.44 a barrel on the ICE Futures Europe exchange. Futures closed at US$59.02 on Monday, the highest settlement since July 2015. The global benchmark traded at a premium of US$6.56 to WTI yesterday.

US inventories

The API report also showed that gasoline stockpiles rose by 1.47 million barrels, while distillate supplies fell by 4.53 million, according to people familiar with the data, who asked not to be named because the information isn’t public.

Inventories at the Cushing, Oklahoma, storage hub climbed by 1.06 million, the API data showed, which would be the biggest build since March if the EIA confirms it.

Gasoline inventories probably dropped by 750,000 barrels, while distillate supplies likely shrank by 2.05 million barrels, according to the Bloomberg survey. At Cushing, crude stockpiles probably increased by 1.5 million barrels last week, according to the survey.

Oil-market news

Brent will remain in backwardation in the fourth quarter, “which may attract further interest from investors as long positions generate roll gains,” UBS Group AG said in a report. Those in the oil market fearing a flood of OpecC supply next year will probably be better off preparing for a shortage, according to Citigroup Inc.

— Bloomberg

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