WTI futures gain despite large build in weekly USA oil inventories

Cornelia Mascio
Febbraio 9, 2017

International Brent crude futures were trading at $55.54 US per barrel as the clock approached noon ET, up 49 cents, or 0.9% from their previous close.

Oil futures slid to a three-week low on Tuesday (7 February), with rig data pointing to a revival in the fortunes of shale explorers. First indications of compliance to that deal showed members cut production by 900,000 barrels a day (bpd) in January, according to Petro-Logistics, which tracks Opec supply.

Still, analysts said the gasoline market remained oversupplied.

For more on crude oil prices and its drivers, read Part 1 of this series. In late November, the cartel agreed on a deal to cut production and convinced several non-OPEC members, including major oil producer Russian Federation, to join the plan.

However, the USA was never part of such a deal.

Although this action does not have a direct effect on oil outputs, this issue could contribute to slower production of oil which could eventually decrease in oil output and could send oil prices to rise. "The U.S. should be invited into the dialogue, the essence of the current events should be explained to them..." Since November, oil prices have grown by around a fifth due to joint efforts of OPEC and non-OPEC nations to cap the output. While OPEC members implement pledged cuts and Russian Federation says its own reductions are ahead of schedule, US production has edged higher as drillers targeting crude boosted the rig count to the most since October 2015.

And the elephant could be addressed on Wednesday.

Westjet Airlines Ltd declined 2.5 per cent to $21.69 despite reporting a higher-than-expected quarterly profit. Eastern Time and any confirmation of the API trend is seen as sparking renewed jitters in the oil market. Although there are hopes that the market would rebalance quickly, Brent and US crude futures have been under pressure on evidence of higher U.S. oil drilling and forecast of a rebound in shale production. It estimates that United States gasoline inventories rose by 2.9 MMbbls (million barrels) between January 27, 2017, and February 3, 2017.

"The draw down in gasoline inventories seems to suggest that much of weak gasoline demand is only temporary", said Phil Flynn, a senior market analyst at the Price Futures Group.

"A price war could be triggered once again and preserving your market share at any cost could become the theme among major producers", he added.

If the API data is confirmed by the EIA, it will be the largest build since October previous year, according to Reuters.

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