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Crude Oil Jumps on Larger-Than-Expected Decline in US Supplies

June 26, 2019 at 17:36 by Andrew Moran

Crude oil futures are rallying midweek after the US government reported a larger-than-expected decline in domestic inventories. The rebound came after crude prices ended a three-session boost, supported by renewed tensions between the US and Iran and Washington slapping a fresh set of sanctions on Tehran. Investors are also keeping an eye on the upcoming Organization of the Petroleum Exporting Countries (OPEC) meeting next week that could send prices higher.

July West Texas Intermediate (WTI) crude oil futures advanced $1.53, or 2.65%, to $59.35 per barrel at 17:17 GMT on Wednesday on the New York Mercantile Exchange. Crude prices have surged nearly 10% in the last week, bringing their year-to-date gains to just under 30%.

Brent, the international benchmark for oil prices, is also soaring as August contracts are up $1.36, or 2.1%, to $66.41 a barrel on London’s ICE Futures exchange. Brent prices have crashed nearly 4% over the last month, but they have advanced 21% so far this year.

According to the US Energy Information Administration (EIA), domestic inventories fell by 12.8 million barrels for the week ending June 21. This is a lot higher than market forecasts showing a drop of 2.8 million barrels. Gasoline stockpiles slipped one million barrels, while distillate supplies tumbled 2.4 million barrels.

The US Baker Hughes total oil rig count came in at 789, up from 788 in the previous week.

In addition to government numbers, the US-Iran conflict is lifting oil prices after the White House imposed new sanctions on the energy powerhouse, prompting the regime to announce a “permanent closure” for diplomacy between the two sides. President Donald Trump, however, has adopted a more cordial tone in recent days, promising that the US and Iran will eventually have a strong relationship.

In the meantime, the administration is attempting to apply economic pressure and bring the country’s oil exports to zero to ignite nuclear concessions.

On July 1 and 2, OPEC and its allies will meet – the original date was scheduled for June 25 and 26. Analysts contend that the cartel will keep its production cuts in place heading into 2020 to support prices and ensure they hover in the $60 range.

In other energy commodities, July natural gas futures were flat at $2.28 per million British thermal units (btu), July gasoline futures soared $0.085, or 4.6%, to $1.93 a gallon. July heating oil futures tacked on $0.04, or 2.27%, to $1.975 per gallon.

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