Oil Posts Gain With Demand for American Crude on the Rise

Updated on
  • Nationwide inventories dropped by 1.85 million barrels
  • Refiners ramped up processing rates for second straight week

Oil sustained its bull-market rally in New York as demand for American crude pushed exports to a record.

Futures added 0.5 percent, ending the session within a dime of Monday’s five-month closing high. The Energy Information Administration reported U.S. crude inventories last week fell for the first time since Hurricane Harvey slammed Texas as refiners boosted processing rates and exporters shipped out one of every six barrels of crude pumped from domestic wells. All of this unfolded against the backdrop of strict OPEC adherence to supply curbs.

“You have a very strong export market and you have a refinery utilization rate that’s coming back from Harvey in leaps and bounds,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. As refineries continued to revive fuel-making units trampled by Harvey, their need for crude has increased, he said.

Oil entered a bull market in New York this week, buoyed by optimistic demand forecasts and supply concerns spurred by Turkey’s threat to halt Kurdish crude shipments through its territory. The Organization of Petroleum Exporting Countries’ compliance with production cuts has improved and General Secretary Mohammad Barkindo pledged to keep pressing onward until supplies are back in balance with demand.

Demand is healthy and “the punchline is OPEC compliance has been pretty strong,” Matt Sallee, who helps manage $16 billion in oil-related assets at Tortoise Capital Advisors LLC, said by telephone.

West Texas Intermediate for November delivery rose 26 cents to settle at $52.14 a barrel on the New York Mercantile Exchange. Total volume traded was about 10 percent below the 100-day average.

Brent for November settlement slid 54 cents to end the session at $57.90 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.76 to WTI. The widening of the spread is an inducement for brokers to ship U..S. crude overseas, where it’ll fetch a higher price.

Need for U.S. Crude

“Global markets are going to keep pulling on domestic inventories quite a bit,” Sallee said. “You can see that in the WTI-Brent spread. That’s pretty clear evidence that the global markets need U.S. supply. That should provide support for WTI.”

U.S. crude stockpiles fell to about 471 million barrels last week and distillate supplies slid for a fourth straight week to a 26-month low. Meanwhile inventories at the key storage hub in Cushing, Oklahoma, climbed to the highest since June and gasoline stockpiles rose for the first time since August.

Oil-market news:

  • Libya’s oil output is rising again after disruptions ended at its biggest field, with production reaching about 950,000 barrels a day.
  • Exxon Mobil Corp. was the standout at Brazil’s first oil auction in two years, signaling strong interest in the country’s offshore geology even with oil prices stuck around $50 a barrel.
  • North Sea oil producers seized on surging crude prices this week to hedge output, joining their U.S. shale oil peers in locking in a floor for future revenue.

— With assistance by Ben Sharples, and Rakteem Katakey

    Before it's here, it's on the Bloomberg Terminal.