Oil Prices Continue Rise on Supply Data, Weaker Dollar

Comment

Shutterstock photo

By Alison Sider and Jenny W. Hsu

Oil prices continued their rise Thursday after U.S. inventory levels fell for the third consecutive week and the U.S. dollar weakened.

U.S. oil for November delivery rose $1.11, or 2.45%, to $46.45 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 93 cents, or 1.99%, to $47.76 on ICE Futures Europe.

While the surprise drop in U.S. crude inventories is still boosting prices, Tariq Zahir of Tyche Capital Advisors said Thursday's gains were largely related to the currency movement.

"Today is a little more about the Fed and no rate increase -- the weakness of the U.S. dollar is providing a tailwind," he said.

Crude prices rallied after data released by the U.S. Energy Information Administration Wednesday showed a bigger- than-expected 6.2-million barrel drawdown in domestic crude stockpiles for the week ended Sept. 16. At 504.6 million barrels, crude inventories were the lowest since Feb. 12, but still 11% above year-ago levels, the EIA said.

The drawdown in crude stocks left some analysts perplexed.

Germany's Commerzbank said in a note that there was no clear indicator as to why stocks had fallen again and that the drop should not be read as a signal that there supply will tighten anytime soon.

However, higher refinery activity was cited as the primary driver by other observers.

"Relatively strong refinery activity for this time of year has put downward pressure on crude stocks," said research firm S&P Global Platts, noting crude run last week at 16.6 million barrels a day was 941,000 barrels a day higher than the five-year average. The refinery utilization rate reached 92%.

Market observers are also weighing the likelihood that members of the Organization of the Petroleum Exporting Countries will reach an agreement on capping output. On Wednesday, OPEC members will meet in Algeria to discuss measures to stabilize prices, but many market watchers remain skeptical of any real action given the longstanding tensions within the group.

"Those who are banking on OPEC to cut or freeze production really should stop dreaming," a Chinese fuel-oil trader based in Singapore said bluntly.

Analysts say the global market remains oversupplied. Production from the Organization of the Petroleum Exporting Countries has grown in recent months owing to record Saudi Arabian production and more coming from Iraq and Iran.

"Global oil markets are digesting events in Libya and Nigeria, where some output is returning from previous disruptions," said Michael Wittner, chief analyst at Société Générale. "Time will tell how much output is returning from previous disruptions."

On Wednesday, an oil tanker left the Libyan port of Ras Lanouf for Italy, marking the first crude export cargo from the terminal since late 2014.

Libya'sNational Oil Corp. is also urging anti-government military groups to unblock the Sharara and El Feel oil fields immediately. In a statement, the NOC said the country's oil production could return to 1.2 million barrels a day within a year if all the pipelines are unfettered and the government releases the requested budget.

"It is time to let Libya's oil flow freely and get Libya back on its feet," the statement said.

Gasoline futures rose 1.34 cents, or 0.96%, to $1.4124 a gallon. Diesel futures rose 2.66 cents, or $1.85%, to $ 1.4677 a gallon.

--Kevin Baxter contributed to this article.

Write to Alison Sider at alison.sider@wsj.com and Jenny W. Hsu at jenny.hsu@wsj.com


  (END) Dow Jones Newswires
  09-22-161027ET
  Copyright (c) 2016 Dow Jones & Company, Inc.



This article appears in: Commodities
Referenced Symbols: CBK , CRZBY


More from Dow Jones Business News

Subscribe






See headlines for CBK

Follow on: