Oil climbs as stockpile drop allays worries over summer's end

Javier Howell
August 24, 2017

Oil prices fell on August 23, weighed down by concerns about rising production from Libya feeding into an oversupplied market and a surprise increase in US gasoline inventories. Over the past four weeks, crude oil imports averaged over 8.2 million barrels per day, 3.1% below the same four-week period a year ago. The oil market most likely will have to prepare for another big drop in US crude supply that will come after the September contract is history.

"Traders of crude oil and gasoline will also have particular interest in the remnants of Tropical Storm Harvey expected to strengthen to Category 1 hurricane status as it crosses the Gulf of Mexico toward a possible Friday landfall on the Texas Coast", Tim Evans, Citi Futures' energy futures specialist, said in a note.

Official inventory data from the U.S. Energy Information Administration is due later on August 23.

USA crude inventories are expected to have fallen for an eighth straight week and drop by 3.4 million barrels, a Reuters poll shows. In July oil production in Libya reached a daily output level of 1.02 million barrels.

Next month will mark the official end of driving season and we could see more inventory builds as it draws near and hence more pressure on oil prices.

XAutoplay: On | OffCrude stockpiles fell by 3.3 million barrels and gasoline stocks were down by 1.2 million barrels, according to the EIA. Venezuela's oil problems could cause OPEC to lose about three-times the crude oil supply that was lost during the Libyan crisis. Nigerian production is back at a 17 month high of 1.8 mbpd while Libyan output has almost tripled from a year ago with production nearing 1.0 mbpd.

Yesterday, industry data showed USA crude oil stocks fell by 3.6 million barrels at the end of last week, the American Petroleum Institute (API) reported, slightly more than expected following a much larger decline the week before.

Refinery runs last week averaged 17.5 million barrels of crude, compared with 17.6 million bpd a week earlier, when gasoline output fell to 10 million bpd. USA oil rigs in operation fell last week to a seven-week low. Rising U.S. production has been a major factor keeping supply and demand from balancing. Earlier this summer, Libyan production spike to over 1 million barrels per day, around four times the output reached at the same point a year ago.

Meanwhile, U.S. crude production has broken through 9.5 million bpd, its highest since July 2015.

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