Oil Rebounds From Biggest Slump in Four Weeks on Easing Supplies

TAFT, CA - JULY 21: An oil rig south of town extracts crude on July 21, 2008 in Taft, California. Hemmed in by the richest oil fields in California, the oil town of 6,700 with a stagnated economy and little room to expand has hatched an ambitious plan to annex vast expanses of land reaching eastward to Interstate 5, 18 miles away, and take over various poor unincorporated communities to triple its population to around 20,000. With the price as light sweet crude at record high prices, Chevron and other companies are scrambling to drill new wells and reopen old wells once considered unprofitable. The renewed profits for oil men of Kern County, where more than 75 percent of all the oil produced in California flows, do not directly translate increased revenue for Taft. The Taft town council wants to cash in on the new oil boom with increased tax revenues from a NASCAR track and future developments near the freeway. In an earlier oil boom era, Taft was the site of the 1910 Lakeside Gusher, the biggest oil gusher ever seen in the US, which destroyed the derrick and sent 100,000 barrels a day into a lake of crude. (Photo by David McNew/Getty Images)
  • U.S. crude, gasoline stocks drop more than 5 million barrels
  • Prices may be anchored near $50 or lower: Astenbeck’s Hall

Oil rebounded from the biggest daily loss in four weeks as industry data showed U.S. crude and gasoline stockpiles declined.

Oil remains in a bear market amid concerns that rising supply from Libya to the U.S. will counter production cuts from the Organization of Petroleum Exporting Countries and its partners including Russia. American crude stockpiles are more than 100 million barrels above the five-year average.

“Gasoline demand has increased because of the U.S driving season and that’s a good sign for the market,” said Barnabas Gan, an economist at Oversea-Chinese Banking Corp. in Singapore. “The rally is still extremely fragile and any signs which point to a higher supply environment into the second half could be a factor for oil prices to fall further.”

West Texas Intermediate for August delivery added as much as 65 cents to $45.78 a barrel on the New York Mercantile Exchange, and was at $45.72 at 8:09 a.m. in London. Total volume traded was about 6 percent above the 100-day average. The contract lost $1.94 to close at $45.13 on Wednesday, snapping the longest run of gains this year.

See also: OPEC Compliance to Cuts Doubted on Output-Export Mismatch

Brent for September settlement gained as much as 65 cents, or 1.4 percent, to $48.44 a barrel on the London-based ICE Futures Europe exchange. Prices slid $1.82, or 3.7 percent, to $47.79 on Wednesday. The global benchmark traded at a premium of $2.47 to September WTI.

U.S. crude stockpiles dropped by 5.8 million barrels last week, the API said, according to people familiar with the data. An Energy Information Administration report Thursday is forecast to show inventories dropped by 2 million barrels, according to a Bloomberg survey.

Oil-market news:

  • U.S. shale drilling is expanding “at a surprisingly fast rate, thus raising the odds for significant oversupply in 2018, even if OPEC maintains its production cuts,” Astenbeck’s Hall wrote in a July 3 letter to investors.
  • U.S. strategic crude stockpiles have dropped to the lowest level in more than 12 years as the shale boom reduces the nation’s need for an emergency buffer against shortages.
  • Saudi Arabia cut August pricing for most of its crude grades to Asia as the world’s largest oil exporter seeks to stay competitive.

source: https://www.bloomberg.com/news/articles/2017-07-05/oil-rebounds-from-biggest-slump-in-four-weeks-on-easing-supplies.