Oil Rises to Highest Since 2014 on Bullish US Inventory Report

Andrew Cummings
April 19, 2018

West Texas Intermediate and international-benchmark Brent crude oil rallied to their highest level since late 2014 on Wednesday after a USA government report showed US crude stockpiles declined last week and as traders continued to price in the possibility of supply disruptions in several key oil-producing nations.

Oil cartel Opec's new price hawk, Saudi Arabia, would be happy for crude to rise to $80 or even $100, three industry sources said, a sign Riyadh would seek no changes to a supply-cutting deal even though the agreement's original target was within sight.

Oil prices rose on Wednesday, lifted by a reported fall in USA crude inventories and by the ongoing risk of supply disruptions.

Oil prices rose more than 3 percent Wednesday in reaction to a weekly decline in US crude and gasoline inventories and a looming meeting between OPEC and non-OPEC producers. The West Texas Intermediate (WTI) for May delivery increased 1.95 USA dollars to settle at 68.47 dollars a barrel on the New York Mercantile Exchange, while Brent crude for June delivery added 1.9 dollars to close at 73.48 dollars a barrel on the London ICE Futures Exchange.

Daily gasoline production averaged over 10.2 million barrels in the week to April 13 and distillate production stood at 5.1 million.

"This may be one of the most bullish reports in some time, with the across-the-board declines in inventories", said John Kilduff, a partner at Again Capital Management in NY.

Nationwide crude inventories decreased 1.05 million barrels last week in the United States, API reported, according to people familiar.

Beyond voluntary supply restriction aimed at propping up prices led by the producer cartel of the Organization of the Petroleum Exporting Countries (OPEC) since 2017, O'Loughlin said falling output in Venezuela due to its political and economic turmoil was supporting prices.

Refinery crude runs fell by 70,000 barrels per day as utilization rates fell by 1.1 percentage points to 92.4 percent of total capacity, the EIA data showed.

"Saudi Arabia wants higher oil prices and yes, probably for the IPO, but it isn't just that", an OPEC source tells Reuters.

Gasoline stocks dropped by 3 million barrels, compared with analysts' expectations in a Reuters poll for a 227,000-barrel drop.

Oil has been supported by the perception among investors that tensions in the Middle East could lead to supply disruptions, including renewed U.S. sanctions against Iran, as well as falling output in crisis-hit Venezuela.

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