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Published: Sat, March 18, 2017
Economy | By Melissa Porter

Oil Prices Rally on Report of Drop in US Inventory

Oil Prices Rally on Report of Drop in US Inventory

Brent crude was 9 cents lower at $51.72 a barrel by 12:51 p.m. EDT (1651 GMT), recovering from Tuesday's drop to $50.25, its lowest since November 30 when OPEC announced its supply accord.

Brent crude oil gained 60 cents to touch $52.41 a barrel, while United States light crude oil soared by 55 cents to touch $49.41 per barrel, reported Reuters.

The WTI price difference between Midland and Cushing, which has swung from plus US$1.40 a barrel in December to minus US$0.85 a barrel now, is due to maintenance at a refinery that consumes the crude, rising Permian output and lower export demand due to competition from West African crude. Non-Opec producers, including Russian Federation, also agreed to cut by a further 600,000 barrels per day. Its members need higher oil prices to balance government budgets, but cutting back production to prop up prices means losing market share as other suppliers step in to fill the gap.

Prices are being supported this week by the U.S. Energy Information Administration's weekly inventories data which showed supply decreased for the first time in nine weeks, dropping 237,000 barrels from a record high.

Nevertheless, global oil supplies increased by 260,000 bpd to 96.52 million bpd in February, the IEA calculated.

The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the US, both locally and overseas.

Also on Wednesday, the International Energy Agency (IEA) said that it sees an implied deficit of 500,000 bpd for the first half at current production levels and supply and demand fundamentals, despite the fact that OPEC's relentless output increase before their November deal led last month to the first global stocks increase in six months.

Some support came from the U.S.

Nymex reformulated gasoline blendstock-the benchmark gasoline contract-rose 0.4% to $1.60 a gallon. Prices rose 89 cents to US$51.81 yesterday.

Distillate: Distillate fuel supplies (including diesel and heating oil) went down by 4.23 million barrels last week, again significantly trumping analysts' expectations for a 1.8 million-barrels fall. Instead of rebounding to $53 a barrel, USA crude has remained stuck around $49.

Richard Mallinson, of the consultancy Energy Aspects, said there...

Analysts say the OPEC deal may be at stake if US producers continue to pose a threat to the oil cartel's market share.

Dollar trends are likely to have an important impact on oil prices during the NY session with the latest COT data watched very closely late in USA trading. "The OPEC cuts were good enough to prevent a repeat of the glut of past year, but it's a different story if you want to have oil at US$60 or US$70". Canada remained the top destination for US crude oil exports in 2016, receiving 301,000 bpd, 263,000 bpd greater than the Netherlands, the second largest destination.

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