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US Crude Hovers Around $53 on Lower Gasoline Stocks

February 9, 2017 at 14:41 by Andrew Moran

US crude is hovering around $53 based on new data that suggest that there has been a drawdown in US gasoline stocks. Despite the decline, the market is still awash in oil, even with the Organization of Petroleum Exporting Countries (OPEC) members about 80% closer to reaching their production cut target of 1.8 million barrels per day (bpd).

March West Texas Intermediate (WTI) crude futures rose $0.70, or 1.34%, to $53.04 per barrel at 14:14 GMT on Thursday on the New York Mercantile Exchange. This comes as US crude tumbled more than 1.5% on Wednesday due to data reporting that US stockpiles of crude surged by 14.2 million barrels last week.

Brent, the international benchmark for oil prices, is also steadily rising on Thursday. April Brent crude futures climbed $0.54, 0.98%, to $55.66 a barrel on London’s ICE Futures exchange. Brent also sank on Wednesday by more than 1%.

According to the US Energy Information Administration (EIA), US gasoline inventories declined by 869,000 barrels last week to 256.2 million barrels. This is much lower than the 1.1 million-barrel increase that was projected by analysts. Moreover, US commercial crude inventories soared by 13.8 million barrels to 508.6 million barrels.

In the same report, officials predicted that US production would grow by 100,000 bpd in 2017, and another 500,000 bpd in 2018.

The considerable drop in gasoline stocks means that US consumption is actually stronger than what was anticipated. Experts suggest that this may help support prices to say above $50, particularly at a time when the global oil market is bloated. Goldman Sachs recently warned in a note to clients that the international market will be oversupplied with oil.

We do not view the recent excess US builds as derailing our forecast for a gradual draw in inventories, with in fact the rest of the world already showing signs of tightness. The draws that we expect will start from a high base. US production has also rebounded, and we view the faster shale rebound as creating downside risk to our 2018 WTI price forecast of $55 per barrel, but not to our expectation that the global oil market will shift into deficit in 1H17.

The World Bank stated in a report last month that the average price of a barrel of oil would be $55.

If you have any questions and comments on the commodities today, use the form below to reply.

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