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Tuesday, October 22nd, 2019

Oil prices rise as falling U.S. inventories stoke rebalancing hopes

by July 26, 2017 General

By Libby George

(Reuters) – prices rose to near eight-week highs on Wednesday, as a fall in U.S. inventories bolstered expectations that the long-oversupplied market was moving toward balance.

Brent crude futures rose 40 cents to $50.60 a barrel by 1213 GMT, after rallying more than 3 percent on Tuesday.

U.S. West Texas Intermediate futures climbed 50 cents to $48.39 a barrel.

U.S. crude stockpiles fell sharply last week as refineries boosted output, while gasoline inventories increased and distillate stocks decreased, the industry group the American Petroleum Institute said on Tuesday.

Crude inventories fell 10.2 million barrels in the week ending July 21 to 487 million, more than the expected decrease of 2.6 million barrels. Data from the U.S. Energy Information Administration on Wednesday could provide more support, with forecasts of a drop for a fourth week in a row.

Tuesday’s stock draw added to hopes the long-awaited market rebalancing was underway. Saudi Arabia said on Monday it would limit exports to 6.6 million barrels per day (bpd) in August, down nearly 1 million bpd from a year earlier.

“The market has been tightening and the refinery margins are strong,” said PetroMatrix managing director Olivier Jakob, saying the U.S. stock draw offered a boost to prices. “You add geopolitical risk premium for Venezuela, and you’ve got a strong market.”

Venezuela, an OPEC member producing about 2 million bpd of oil, faces deepening economic woes and protests.

President Nicolas Maduro’s adversaries plan strikes to push him to abandon a weekend election. The United States is considering financial sanctions to halt dollar payments for the Venezuelan

Nigerian output slipped this week as leaks forced Shell to shut a pipeline exporting some 180,000 bpd of Nigeria, which has been exempted from OPEC-led production curbs, has agreed to cap or cut output when it stabilised at 1.8 million bpd.

But analysts said the current price rally could encourage more production, particularly from the United States.

“Relieved bulls should be careful what they wish for. Any price rebound will only embolden U.S. shale producers at a time when rumours have started to emerge that the U.S. shale boom is slowing,” PVM analyst Stephen Brennock said in a note.

Anadarko Petroleum Corp said on Monday it would cut its 2017 capital budget by $300 million because of depressed prices, the first major U.S. producer to do so, after posting a larger-than-expected quarterly loss.

(Additional reporting by Fergus Jensen in Singapore; Editing by Edmund Blair)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)