Falling U.S. inventories boost oil prices
Oil rose on Wednesday on reports of falling stockpiles and rising refinery activity in the United States, but analysts said a global supply glut would keep prices under pressure.
Brent crude futures LCOc1 were up 77 cents at $44.34 per barrel by 0937 ET after settling 99 cents lower the day before. U.S. crude futures CLc1 were up 50 cents at $41.17 a barrel.
The American Petroleum Institute (API), an industry group, said on Tuesday that U.S. crude stockpiles fell last week by 482,000 barrels due partly to higher refinery runs.
Official inventory data is due at 1030 ET from the U.S. government’s Energy Information Administration (EIA).
A poll of eight analysts predicted a crude stock build of 1.9 million barrels on average in the week ended Nov. 13 <EIA/S>.
Despite the gains on Wednesday, most analysts expect prices to remain low for the rest of the year and into 2016 as production continues to outpace demand.
“It’s a bullish signal for macro traders,” said Virendra Chauhan, analyst at Energy Aspects.
“But if you look beyond the day-to-day, the fundamentals are bearish. There’s talk of floating storage and if you look at differentials for physical oil in the North Sea, for Urals and for West Africa they are very low.”
Also adding to a picture of a well-supplied market, Saudi Arabia raised its oil exports in September by 113,000 barrels per day (bpd) to 7.111 million bpd from 6.998 million bpd in the previous month, official data showed on Wednesday.
A trader said that investors who had sold heavily on the back of the growing glut were covering short positions ahead of the EIA data.
Onshore inventories across the world are on the brink of being full, while offshore tanker storage requires prices on the far end of the curve to be higher than prompt deliveries in order to warrant storage.
“The market is actively seeking storage solutions,” Jefferies said in a note, but with January 2017 prices around $6 a barrel above those for January 2016, the spread is too low to make floating storage attractive as freight costs still have to be included.
An economic slowdown in Asia, and China in particular, is also hitting other commodities. Copper fell towards six-year lows on Wednesday as traders increased their bets on waning demand in top user China.