Sharp Fall in Crude Inventories Galvanize Oil Prices

Reuters

Wednesday's decline came as data from the American Petroleum Institute late Tuesday showed that US crude supplies fell for a second week in a row, by 4.1 million barrels for the week ended September 29, but also indicated that gasoline stockpiles rose 4.2 million barrels, while inventories of distillates declined by 584,000.

Last week, oil prices increased due to the indications that the three-year crude glut is gradually easing, which restricted prices.

The referendum in the Kurdish north of Iraq last week added a risk premium to the price of oil.

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The Hawija offensive was launched in on September 21 by Iraq's army as part of its drive to dislodge ISIS from the country. The United Nations said on October 3 that an estimated 12,500 people had fled Hawija since the launch of the offensive.

Rosneft is Russia's largest oil producer.

When Hurricane Harvey hit U.S. Gulf Coast refineries in late August, Brent crude futures neared their highest in almost two years close to $60 a barrel, while prices for key North Sea grades hit multi-month, or even multi-year highs. Total volume traded was about 14% below the 100-day average. According to a survey by Reuters, OPEC's production rose by 50,000 barrels per day in September. "Any weakness in oil prices is thus likely to be short-lived", said Fawad Razaqzada, market analyst at futures brokerage Forex.com. Yet the key question remains - can the current rebalancing effects be sustained?

Demand for North Sea crude has risen by 5 percent year-on-year to around 1.74 million barrels per day in the first nine months of this year, according to Reuters trade flows data, which had helped tilt the forward market into backwardation. But the supply side of the rebalancing equation is what has many market experts pondering.

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Oil refinery storage tanks and petrochemical refineries stand in this aerial photograph taken above Texas City, Texas, U.S., on Wednesday, Aug. 30, 2017. However, output is still expected to climb, even if gradually, to a 48-year record in 2018.

The move by OPEC is meant for warranting balance in the oil market.

While the inventory draws keep piling on the United States, the global supply/demand situation for crude oil is still not balanced, and fears are that OPEC's now proposed end date of March 2018 for the cuts will prove to be too soon. Moreover, its goal for higher oil prices only invites further drilling by American producers.

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The industry outsider on Tuesday afternoon will lay out for investors his strategic plan for the 114-year-old automaker. Hackett's plan also entails moving production of the Ford Focus from North America to China to save on costs.

High salaries and easy access to recreational drugs can add up to risky conditions on the job for oil workers. But as recent history has shown, investors may want to fasten their seat belts.

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