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Crude Oil Extends Gains As EIA Reports Third Straight Supply Drop

December 19, 2018 at 18:01 by Andrew Moran

Crude oil futures are rallying more than 3% midweek after the US government reported the third consecutive weekly decline in domestic inventories. Oil prices have been tumbling in recent trading sessions on reports that producers are considering raising output, adding to the global supply glut.

January West Texas Intermediate (WTI) crude futures advanced $1.42, or 3.07%, to $47.66 per barrel at 16:36 GMT on Wednesday on the New York Mercantile Exchange. US crude has been trading at its worst level in 16 months. Since peaking in October, crude prices have cratered 32%, wiping out 2018’s gains. Year-to-date, oil is down 17%.

Brent, the international benchmark for oil prices, is also trading higher. February Brent crude futures tacked on $1.29, or 2.29%, to $57.55 a barrel on London’s ICE Futures exchange. Brent has fallen 26% in the last three months, bringing its YTD losses to more than 8%.

According to the US Energy Information Administration (EIA), domestic oil inventories dropped by 500,000 barrels for the week ending December 14. While the market did anticipate a decrease of three million barrels, it still represents the third consecutive weekly decline. Gasoline stockpiles jumped by 1.8 million barrels, while distillate inventories slipped 4.2 million barrels.

The Baker Hughes total oil rig count stood at 873, down from 877 in the previous week.

The global oil market has been rattled after market analysts discovered that Russia was boosting its production to 11.42 million barrels per day (bpd) as of January. This has spurred speculation that other major producers will follow suit, even though the Organization of the Petroleum Exporting Countries (OPEC) and non-member allies agreed to slash output by 1.2 million bpd.

But oil-rich nations in the Middle East still expect international stockpiles to fall by the end of March.

In other energy commodities, January natural gas futures shed $0.09, or 2.14%, to $4.20 per million British thermal units (btu). January gasoline futures dipped $0.01, or 0.97%, to $1.41 a gallon. January heating oil futures surged $0.06, or 3.34%, to $1.81 per gallon.

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