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US Crude Rallies As Gasoline Supplies Post Surprise Decline

January 30, 2019 at 17:20 by Andrew Moran

Crude oil futures are rallying midweek after the US government reported a jump in domestic inventories and a surprise decline in gasoline supplies. Crude contracts, which have recorded double-digit gains this month, are further gaining on the turmoil in oil-rich Venezuela and fears over US-China trade woes that could curb energy demand.

March West Texas Intermediate (WTI) crude oil futures climbed $1.49, or 2.79%, to $54.80 per barrel at 15:30 GMT on Wednesday on the New York Mercantile Exchange. Oil prices are trading at their best levels in more than two months, advancing crude by 18% in January.

Brent, the international benchmark for oil prices, is also surging in the middle of the trading week. March Brent crude futures rose $1.21, or 1.97%, to $62.53 a barrel on London’s ICE Futures exchange. Like its US counterpart, Brent prices are trading near nine-month highs and are up 17% this month.

According to the US Energy Information Administration (EIA), domestic crude stockpiles rose 900,000 barrels for the week ending January 25, which is a lot lower than the median estimate of a 3.1 million-barrel increase. Gasoline inventories tumbled by 2.2 million barrels, while distillate supplies slipped 1.1 million barrels.

The US Baker Hughes total oil rig count was 862, up from 825 last week.

Oil markets are paying attention to what is unfolding in Venezuela. With political upheaval sweeping across the nation with the world’s largest oil reserves, there are risks of supply disruptions. Some forecasts show a shortfall of as much as 500,000 barrels per day (bpd), stemming from political turmoil, US sanctions, and foreign buyers worried about doing business with Petróleos de Venezuela SA, or PdVSA.

In the background, production cuts of roughly 1.2 million bpd in the first half of 2019 by the Organization for Petroleum Exporting Countries (OPEC) are lifting the price of crude. With lower supplies, and the possibility of falling demand levels, the goal of rebalancing an oversupplied market could be reached within the next two years.

Meanwhile, US-China trade tensions are hanging over crude markets, leading traders to fear that the world’s second-largest economy could further reduce its demand.

In other energy commodities, March natural gas futures slid $0.03, or 1.01%, to $2.875 per million British thermal units (btu). March gasoline futures added $0.05, or 3.8%, to $1.42 a gallon. March heating oil futures tacked on $0.02, or 1.05%, to $1.91 per gallon.

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