Oil Pares Gain After Crude, Fuel Supplies Rise in Industry Data

Updated on
  • Iraq has already reduced production by 180,000 barrels a day
  • Trump takes steps to advance Keystone XL, Dakota Access lines

Weinberg: OPEC Cuts Won’t Debt Global Inventories

Oil gains eased in New York after an industry report that U.S. crude and fuel stockpiles climbed last week.

Crude supplies rose 2.93 million barrels, the American Petroleum Institute was said to report. Futures lost about 27 cents per barrel from the close after the release of the data. Iraq has trimmed supply by 180,000 barrels a day and will cut a further 30,000 a day by the end of the month, Oil Minister Jabbar Al-Luaibi said. President Donald Trump took steps to advance construction of the Keystone XL and Dakota Access oil pipelines while foreshadowing a "renegotiation" of terms.

Oil has held above $50 a barrel since the Organization of Petroleum Exporting Countries and 11 other countries agreed late last year to curtail supply by about 1.8 million barrels a day. While Saudi Arabia says more than 80 percent of the targeted cut has been implemented since the deal took effect Jan. 1, Goldman Sachs Group Inc. warned Tuesday that prices above $60 will boost output, including from shale. U.S. drillers last week added the most oil rigs since 2013.

"The market is having to filter a lot right now: Keystone, Trump and OPEC issues," Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary, said by phone. "OPEC adherence appears to be a lot better than anticipated."

West Texas Intermediate for March delivery rose 43 cents, or 0.8 percent, to settle at $53.18 a barrel on the New York Mercantile Exchange. It was the highest close for a front-month contract since Jan. 6. Total volume traded was about 13 percent below the 100-day average. WTI traded at $52.91 at 4:40 p.m. in New York after the API report.

Brent for March settlement climbed 21 cents, or 0.4 percent, to $55.44 a barrel on the London-based ICE Futures Europe exchange, closing at a $2.26 premium to WTI.

Industry Data

Gasoline inventories increased 4.85 million barrels in the week ended Jan. 20, according to people familiar with the API data. Stockpiles of distillate fuel, a category that includes heating oil and diesel, rose 1.95 million.

Analysts surveyed by Bloomberg project that the Energy Information Administration will report on Wednesday that U.S. crude stockpiles rose by 2.5 million barrels last week.

TransCanada Corp.’s Keystone pipeline was rejected under former President Barack Obama, and Energy Transfer Partners LP’s $3.8 billion Dakota Access project was stalled when the Obama administration halted work on land near Lake Oahe in North Dakota amid protests by Native American groups.

"It’s the oil industry’s turn to be in Trump’s barrel," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. "This isn’t a surprise because these pipelines fit into his pro-industry, pro-infrastructure agenda."

Iraqi Adherence

In Iraq, OPEC’s second-biggest producer, 90 percent of output cuts have come from oil companies run by the federal government. But Baghdad is also coordinating reductions with the semi-autonomous region of Kurdistan and international oil companies, Al-Luaibi said in London. It’s too early to say if the cuts could be extended beyond the initially agreed six-month term, he said.

See also: OPEC helps cheap U.S. oil find its way to group’s top customers

"Compliance is a big deal," Thomas Finlon, director of Energy Analytics Group in Wellington, Florida, said by phone. "The initial signs are good. The Saudis said that OPEC has already cut production by 1.5 million barrels out of the 1.8 million promised."

Libya, which was exempt from the OPEC production curbs, is currently pumping 715,000 barrels a day, the highest level in three years, National Oil Corp. Chairman Mustard Sanalla said in the text of a speech given in London. He sees output at 1.25 million barrels a day by the end of 2017.

Oil-market news:

  • Nigeria’s Minister of State for Petroleum Emmanuel Kachikwu said oil could reach the mid-$60s within months. The country is currently pumping 1.5 million barrels a day, he said in a Bloomberg Television interview.
  • Asian refineries are turning to the North Sea for crude as their primary suppliers restrict output in an effort to eliminate a glut, data compiled by Bloomberg show.
  • Compliance by countries participating in the OPEC-led supply cut deal is at about 85 percent, according to Jeffrey Currie, head of commodity research at Goldman Sachs.

— With assistance by Rakteem Katakey

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