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Crude Oil Fluctuates After Unexpected Jump in US Inventories

April 3, 2019 at 15:58 by Andrew Moran

Crude oil futures are trading up and down midweek after the US government reported an unexpected increase in domestic supplies. US crude prices, trading near five-month highs, have been gaining on sharp decreases in global production and optimism of renewed demand from the world’s second-largest economy.

May West Texas Intermediate (WTI) crude futures rose $0.10, or 0.16%, to $62.68 per barrel at 15:15 GMT on Wednesday on the New York Mercantile Exchange. WTI prices have advanced more than 5% in the last week, bringing their year-to-date gains to more than 33%.

Brent, the international benchmark for oil prices, is also struggling to find direction in the middle of the trading week. June Brent crude futures edged up $0.07, or 0.1%, to $69.44 a barrel on London’s ICE Futures exchange. Brent has rallied about 3% in the last five trading sessions, increasing its 2019 gains to just under 28%.

According to the US Energy Information Administration (EIA), domestic crude stockpiles surged 7.2 million barrels in the week ending March 29, beating the market forecast of a drop of 100,000 barrels. Gasoline supplies tumbled by 1.8 million barrels, while distillate inventories slipped two million barrels.

The US Baker Hughes total oil rig count was 816, down from 824 last week.

Supply and demand have been driving the global oil market in recent days. The Organisation of the Petroleum Exporting Countries (OPEC) and other major crude producing markets have been slashing output levels. After agreeing to curb production by 1.2 million barrels per day (bpd) for the first half of 2019, it is widely anticipated that OPEC will extend this agreement into October to support prices.

Analysts contend that OPEC’s crude oil output will average 30.1 million bpd in 2019, down from 31.9 million last year.

OPEC is scheduled to meet in Vienna on April 17.

Moreover, the decline in Iranian and Venezuelan production has taken a bite out of global supplies, a trend that could further support prices.

With reports that a new US-China trade pact is “90%” complete, investors are bullish that this could lift the fledgling Chinese economy, which many feared would lead to the country decreasing its demand for crude. Should the two sides ratify a trade agreement, then Chinese growth could stay above the important 6% threshold.

In other energy commodities, May natural gas futures dipped $0.015, or 0.6%, to $2.66 per million British thermal units (btu). May gasoline futures were unchanged at $1.92 a gallon. May heating oil futures slipped $0.01, or 0.53%, to $1.99 per gallon.

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