Oil Rises To 8-Week High Following Unexpected US Inventory Draw

Chelsea West
July 29, 2017

Earlier this week, Saudi Energy Minister Khalid al-Falih indicated that OPEC's de facto leader and biggest producer Saudi Arabia would cut its crude exports to just 6.6 million barrels per day next month.

Oil prices held just below eight-week highs on Thursday, supported by a steeper-than-expected decline in USA crude inventories that boosted expectations of a shift to a more balanced market.

Brent crude futures were down 0.19 percent, at $51.39 per barrel, as of 07:59 am (MSK). Physical markets have firmed due in large part to very strong refining margins.

Light sweet crude oil (WTI) futures rose 0.29 dollar or 0.59 percent to close at USD 49.04 a barrel at the New York-based commodity exchange NYMEX.

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But analysts say oil prices may have little room to head higher as recent gains could encourage more output, particularly from us shale producers with low costs.

Yesterday, the EIA once again helped to lift oil market spirits by reporting another hefty decline in US commercial crude oil inventories for the week ending July 21. WTI-Brent spread was stable on Jul-2017. Gasoline stocks fell by 1 million barrels, compared with analyst expectations for a 614,000-barrel drop.

OPEC also called on several members to boost compliance with production cuts to help clear excessive global stocks and support flagging prices.

Despite some bullish signs, "the latest price rise is on a fragile footing", Commerzbank analysts contend, noting OPEC production likely would rise in the coming months as the group has not officially capped output from Libya and Nigeria. Combined, the total oil and gas rig count in the U.S. now stands at 958 rigs, up 495 rigs from previous year, with oil rigs in the United States increasing by 2 and gas rigs increasing by 6 this week.

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