EIA reports 6th straight weekly drop in U.S. crude

Oil prices were on pace to close at their highest level in nearly three weeks Wednesday after the EIA reported a sixth straight weekly decline in U.S. crude inventories.

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 1.8 million barrels for the week ended May 12. That was the sixth weekly drop in a row reported by the EIA.

The American Petroleum Institute late Tuesday, however, reported an 882,000-barrel climb, while analysts polled by S&P Global Platts forecast a fall of 2.2 million barrels.

June West Texas Intermediate crude CLM7, +1.13% added 58 cents, or 1.1%, to $49.23 a barrel on the New York Mercantile Exchange, set for their highest finish since April 28, according to FactSet data. July Brent crude LCON7, +1.34% on London’s ICE Futures exchange rose 79 cents, or 1.5%, at $52.44 a barrel.

Troy Vincent, oil analyst at ClipperData, attributed the decline in crude stocks to the 400,000 barrel-a-day increase in exports and a more than 300,000 barrel-a-day rise in refinery runs of crude. “This report put crude-oil inputs at refiners just shy of their record high,” he said.

The EIA also reported that gasoline stockpiles declined by 400,000 barrels, while distillate stockpiles were down 1.9 million barrels last week. Analysts surveyed by S&P Global Platts expected a fall of 500,000 barrels for gasoline stocks and a drawdown of 1.3 million barrels for distillates, which include heating oil.

“A triumvirate of draws for crude, gasoline and distillates is a supportive influence for prices,” said Matt Smith, director of commodity research at ClipperData.

On Nymex, June gasoline RBM7, +0.26% added 0.4% to $1.611 a gallon, while June heating HOM7, +1.54% added 1.3% to $1.537 a gallon.

June natural gas NGM17, -1.11%   meanwhile, shed 1.2% to $3.19 per million British thermal units, ahead of an EIA supply update due Thursday.

“Implied demand for gasoline and distillates ticked higher on the prior week, helping to draw products despite strong refining activity,” said Smith.
Taking a look at the bigger picture, oil investors have been pulled between expectations that members of Organization of the Petroleum Exporting Countries and non-cartel suppliers will extend their production-cut agreement on the one hand, and accelerating oil output from the U.S. on the other.
On Monday, Saudi Arabia and Russia said the OPEC production cut deal will be extended for another nine months.
But skepticism on the effectiveness of the production cuts returned after the International Energy Agency on Tuesday said that even if the OPEC cuts are extended to the remainder of the year, “stocks at the end of 2017 might not have fallen to the five-year average, suggesting that much work remains to be done in the second half of 2017 to drain them further.”

For OPEC to reach its goal of bringing global inventories back to the five-year average, the cartel will need to drain its supplies by 1 million barrels a day over the next 10 months, said Bernstein Research, calling the extension of the 1.8-million barrel a day cuts into 2018 as critical and logical.

Original Story