Oil Prices Lifted by Dip in U.S. Oil Products Stocks
23 March 2017 - 3:02PM
Dow Jones News
By Jenny W. Hsu
Crude futures rebounded in Asia trade Thursday after data showed
U.S. gasoline and distillates stocks declined in the latest
reporting week, signalling that refiners have returned from
maintenance and crude demand in the U.S. is set to rise.
On the New York Mercantile Exchange, light, sweet crude futures
for delivery in May traded at $48.35 a barrel at 0124 GMT, up $0.31
in the Globex electronic session. May Brent crude on London's ICE
Futures exchange rose $0.30 to $50.94 a barrel.
Data by the U.S. Energy Information Administration showed U.S.
gasoline stocks fell by 2.8 million barrels in the week ended March
17, marking a fifth straight drawdown. Gasoline demand is expected
to march higher as U.S. approaches the summer driving season.
Distillate stocks also fell by 1.9 million barrels.
Crude supplies, however, swelled by 5 million barrels, bringing
the total to a record high of 533.1 million barrels. Apart from
domestic production which rose for the fourth week to 9.13 million
barrels a day, strong imports also contributed to the growth,
analysts said.
The data offered mixed messages to the market. On one hand, the
rise in U.S. refinery utilization rate indicates the annual
maintenance season is now past and refiners will lap up more crude,
said Societe Generale. But the accelerating crude output by
upstream players means the U.S. is well positioned to crimp the
Organization of the Petroleum Exporting Countries' effort to pare
down the still-bloated global crude inventories. Last year, OPEC
and a handful of heavyweight producers such as Russia, clinched a
deal to cut their combined daily productions by 1.8 million
barrels. Cartel officials have said the main objective of the pact
is to push global inventories down to the five-year average level
this year.
"Last week's increase in U.S. production and stocks will do
little to assuage fears that the OPEC output cuts will not be
enough to draw down stocks," said Thomas Pugh, a commodities
economist at Capital Economics.
Some say the gush of new U.S. oil in the market, combined with
rising production out of Libya, will leave OPEC little choice but
to prolong the production cut plan beyond the initial January-June
period.
"True, prices are falling now but these producers must take a
long term view and cutting production will help tighten the oil
market in the long run," said Barnabas Gan, an economist at
Singapore-based OCBC bank.
Describing the recent above-10% fall in oil prices as a mere
"blink", Mr. Gan still bets both WTI and Brent prices to rebound to
$65 a barrel by the end of the year, driven by robust crude demand
by developing economies such as India and China, as crude
production in Asia dwindles.
China's crude output, Asia's largest crude producer accounting
for 47% of region's total production, fell 8% on-year in the first
two months to 3.9 million barrels. Meanwhile, its crude imports
rose 3.5% on-year in February to 8.4 million barrels a day.
Indonesia and Malaysia are also poised to see long term declines
due to a dearth of new large-scale projects beyond 2018, said BMI
Research.
Nymex reformulated gasoline blendstock for April--the benchmark
gasoline contract--rose 26 points to $1.6045 a gallon, while April
diesel traded at $1.5030, 62 points higher.
ICE gas oil for April changed hands at $452.50 a metric ton, up
$5.50 from Wednesday's settlement.
Write to Jenny W. Hsu at jenny.hsu@wsj.com
(END) Dow Jones Newswires
March 22, 2017 23:47 ET (03:47 GMT)
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