Brent crude and West Texas Intermediate started the day today with gains, albeit modest, following yesterday’s Weekly Petroleum Inventory Report by the Energy Information Administration that said Saudi oil exports to the United States had declined as OPEC’s de facto leader cuts production deeper than agreed to accelerate a hesitant rise in prices.
Reuters reports that WTI gained 0.7 percent in morning trade in Asia, to US$54.63 a barrel, with Brent crude adding 1 percent to trade at US$62.24 per barrel. It also quoted ANZ bank as saying, “Crude oil prices were stronger after signs emerged that OPEC cuts are impacting trade. EIA’s weekly report showed that U.S. imports from Saudi Arabia fell by more than half from the previous week to 442,000 barrels per day (bpd). This is the second lowest level in weekly data going back to 2010.”
Yet the decline in Saudi crude oil exports to the United States was not the only bullish factor for prices in EIA’s Wednesday report. The agency also reported a rather more modest build in crude oil inventories of under a million barrels, and a sizeable decline in gasoline inventories, which had been booking substantial gains for four weeks in a row. Related: The Only Way For The Aramco IPO Is Downstream
Additionally, the new round of sanctions from Washington that target Venezuela’s state oil company also helps prices by sparking concern about potential supply disruptions as PDVSA is one of the four largest suppliers of crude oil to Gulf Coast refiners.
In the headwind department, soft gasoline demand in the United States came to the fore earlier this week. Reuters’ John Kemp brought gasoline into the spotlight this week, citing a report from the EIA that found gasoline consumption in the world’s largest user of crude oil remained flat on the year over the first ten months of 2018. What’s more, the EIA expects gasoline consumption to have declined by 40,000 bpd over full-2018 from a year earlier.
This softer demand for gasoline will likely continue to apply counterpressure to prices amid the OPEC cuts, in addition to growing expectations that the U.S. will probably extend sanction waivers to some of Iran’s biggest oil clients.
By Irina Slav for Oilprice.com
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