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Eighth Weekly Drop in US Crude Supplies Helps Lift Oil Prices

August 23, 2017 at 16:46 by Andrew Moran

Oil futures are surging higher midweek in part to another weekly decline in US crude supplies. Despite domestic production climbing to its highest levels in more than two years, traders were bullish on Texas Tea on Wednesday.

September West Texas Intermediate (WTI) futures rose $0.52, or 1.09%, to $48.35 per barrel at 16:28 GMT on Wednesday on the New York Mercantile Exchange.

Brent, the international benchmark for oil prices, is also rallying in the middle of the trading week. October Brent crude futures jumped $0.60, or 1.16%, to $52.47 a barrel on London’s ICE Futures exchange.

According to the US Energy Information Administration (EIA), domestic crude stockpiles tumbled by 3.3 million barrels for the week ending August 18. This is the eighth consecutive week of a weekly draw down in US crude supplies. The EIA further reported that total US crude production increased by 26,000 barrels per day (bpd) to 9.528 million bpd, the highest it has been since July 2015.

US government data found that gasoline stockpiles dipped 1.2 million barrels, while distillate stockpiles remained unchanged.

For the time being, the market is dismissing the international supply glut. Even with Organization of the Petroleum Exporting Countries (OPEC) failing to reach its target of 1.8 million bpd because of Libya’s stronger output, oil prices have been able to post solid gains. OPEC may have some reprieve for the remainder of August because of concerns that Sharara, Libya’s largest oil field, has been shut down for the last several days over the chaos ensuing across the beleaguered nation.

Commerzbank analysts wrote in a note to investors on Wednesday:

Yesterday’s flood of news reports makes it clear that the situation in Libya is still chaotic and that conditions in the country are still far from normal.

This also makes it unlikely that Libya will be included in the OPEC cut agreement anytime soon.

Crude prices further benefited from a weaker US dollar as the greenback slipped 0.21%. A weaker US dollar is good for commodities like oil because it makes it cheaper for foreign investors to purchase.

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