Oil treads water as US crude inventories fall, but trade tensions weigh

US commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to August 31, the lowest since February 2015. (Reuters)
Updated 07 September 2018
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Oil treads water as US crude inventories fall, but trade tensions weigh

  • US commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to August 31
  • ‘US production growth will now significantly decelerate until 4Q19’

SINGAPORE: Oil prices held steady stable on Friday, as the market balanced a fall in US crude inventories to the lowest levels since 2015, with Sino-American trade tensions and economic weakness from emerging markets.
US West Texas Intermediate (WTI) crude futures were at $67.78 per barrel at 0448 GMT, up just 1 cent from their last settlement.
International Brent crude futures dipped 8 cents to $76.42 a barrel.
“Oil inventory data released last night showed a larger-than-expected draw in crude inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
US commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to Aug. 31, the lowest since February 2015, US Energy Information Administration (EIA) data showed on Thursday.
Despite that, analysts said prices were curbed by a rise in refined product stocks and a relatively weak US peak fuel consumption season this summer, known as the driving season.
Gasoline stocks rose by 1.8 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 3.1 million barrels, the EIA data showed.
“US gasoline inventories are now above the top of the 5-year range,” said US investment bank Jefferies in a note on Friday.
“The US summer driving season has proven to be a lackluster one in terms of gasoline demand,” said O’Loughlin of Rivkin Securities.
Ongoing emerging market weakness as well as potential new US import tariffs on Chinese goods were also weighing on oil market sentiment.
“Emerging markets, which tend to have a higher energy intensity of GDP, are an obvious concern,” said Jefferies.
Asian shares slipped to a 14-month trough on Friday as investors feared a new round of Sino-US tariffs, while currencies from Indonesia to India also remained under pressure.
On the supply side, US crude oil production last week remained at a record 11 million barrels per day (bpd), a level it has largely been at since July.
After rising by almost a third in the last two years, Jefferies said: “US production growth will now significantly decelerate until 4Q19.”
Outside the United States, US sanctions against major oil producer Iran, which from November will target oil exports, are fueling expectations of a tighter market toward the end of the year.
“The main driver of oil prices, in our view, remains the re-imposition of US ... sanctions against consumers of Iranian oil,” said Standard Chartered this week.
“There is still considerable uncertainty over the strategies of China and India, Iran’s main customers.”
Washington has indicated it may offer temporary sanctions waivers to allied countries that are unable to immediately cease imports from Iran.


OPEC will balance oil markets, but spare capacity limited — Nigerian official

Updated 28 min 15 sec ago
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OPEC will balance oil markets, but spare capacity limited — Nigerian official

  • ‘OPEC will do everything to stabilize, to balance the market’
  • Nigeria’s current crude oil production is about 1.7 million bpd

SINGAPORE: The Organization of the Petroleum Exporting Countries (OPEC) will act to balance the market after oil prices hit their highest in four years, but its options may be limited by available spare capacity, a Nigerian oil industry official said on Wednesday.
“It’s obvious that if you have high prices it’ll affect demand, so you have to do some market balance,” Malam Mele Kyari, head of crude oil marketing at Nigeria’s state oil firm NNPC and also the country’s OPEC representative, said.
“OPEC will do everything to stabilize, to balance the market but I’m sure you’re also aware that there’s a limit to what they can do. You must have the spare capacity,” Kyari said.
Oil prices surged this week on uncertainty over the global supply outlook following US sanctions on Iran’s oil exports and also as Saudi Arabia and Russia ruled out any immediate boost to output.
Kyari said Nigeria planned to increase its crude oil, condensate output by 100,000 barrels per day by the end of the year, up from about 2 million bpd currently.
The country’s current crude oil production is about 1.7 million bpd, he said.
In 2019, the African producer is aiming for an average output of 2.3 million bpd by boosting output from existing fields as well as starting new production from an ultra-deepwater field, Kyari said.
Located some 130 kilometers off Nigeria’s coast at water depths of more than 1,500 meters, the Egina oilfield is expected to start production in December and its output could peak at 200,000 bpd.
Kyari was in Singapore to launch the new Egina crude grade with field operator French oil major Total at APPEC.
The crude has an API gravity of 27.3 degrees and has a sulfur content of 0.165 percent, a provisional crude assay from Total showed.
The grade has a higher yield of gasoil and vacuum distillates compared with other products, according to the assay.