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Oil Gains on Second Straight Drop in Crude Inventories

December 12, 2018 at 16:21 by Andrew Moran

Crude oil futures are trying to muster up a rally midweek after the US government reported a decrease in domestic inventories for the second consecutive week. Oil prices were further supported by Libya slashing output levels and a lower US dollar.

January West Texas Intermediate (WTI) crude futures advanced $0.14, or 0.27%, to $51.79 per barrel at 15:54 GMT on Wednesday on the New York Mercantile Exchange. Since peaking in October, crude prices have cratered more than 23%, bringing its year-to-date losses to roughly 10%.

Brent, the international benchmark for oil prices, is also posting gains on Wednesday. February Brent crude futures rose $0.44, or 0.73%, to $60.64 a barrel on London’s ICE Futures exchange. Like its US counterpart, Brent has plunged nearly 23% after peaking in October. However, its 2018 losses are down just 3%.

According to the US Energy Information Administration (EIA), domestic crude inventories fell by 1.2 million barrels for the week ending December 7, which is lower than the market forecast of 2.8 million barrels. This is the second straight week of a decrease. US output is still above 11 million barrels per day (bpd). Gasoline stockpiles surged 2.1 million barrels, while distillate supplies slipped by 1.5 million barrels.

The Baker Hughes total rig count stood at 877, down from 887 a week ago.

This week, the Libyan government announced that it was cutting crude supplies after a militia group seized control of one of the nation’s biggest oilfields. The news shortly followed the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers agreeing to slash production by 1.2 million bpd for six months effective January 1.

Crude gained further support from a tumbling US dollar as the greenback slid 0.48% to 96.99. A weaker buck is good for commodities pegged in dollars because it makes it cheaper for foreign investors to purchase. The greenback has been one of the top performing currencies in 2018, jumping more than 5%.

In other energy commodities, March natural gas futures plummeted $0.15, or 3.76%, to $3.89 per million British thermal units (btu). January gasoline futures tacked on $0.11, or 0.76%, to $1.45 a gallon. January heating oil futures edged up $0.03, or 1.65%, to $1.87 per gallon.

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