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Crude-oil futures rose Wednesday, picking up more steam after a U.S. government-supply report showed an unexpected decline in crude inventories. On the New York Mercantile Exchange, light, sweet crude futures for January delivery rose 50 cents, or 0.8%, to settle at $67.38 a barrel. January Brent crude on London’s ICE Futures exchange changed directions as the session progressed, ending the day down 62 cents, or 0.9%, at $69.92 a barrel.
The Energy Information Administration said earlier Wednesday U.S. crude-oil supplies declined 3.7 million barrels on the week ended Nov. 28. Analysts surveyed by Platts had expected crude inventories to increase by 380,000 barrels on the week. Crude oil’s surprise drop in supplies was due to higher refinery runs and fewer imports, analysts at UBS said in a note Wednesday. The EIA also reported gasoline inventories rose by 2.1 million barrels, while supplies of distillates rose by three million barrels. Gasoline futures ended at a five-year low on Wednesday. Analysts polled by Platts had expected distillates supplies to decline by 1.2 million barrels and gasoline stockpiles to end the week unchanged.
Oil prices had fallen overnight after reports of an agreement between Iraq and the Kurdish regional government raised concerns of new oil production flooding an already oversupplied market. Nymex West Texas Intermediate crude has been down for five of the past six trading sessions, and has lost 38% of its value since June. Brent crude has lost around 39% of its value since June. Wall Street continued to pore over the implications of OPEC’s decision last week to stay pat on production. That was seen as aimed at preserving market share. Some had expected the cartel to cut its output to help put a floor on prices.
Rising output from U.S. shale and other producers has competed with OPEC’s oil, and analysts have tried to pinpoint how low and for how long crude prices may fall until some supply-and-demand balance is restored. The era of oil at $100 a barrel, however, is likely over, Edward Morse, head of commodities research at Citigroup, said in a report. “If the market is looking to U.S. shale for a [price] floor, Citi thinks that floor is nearer to $50 a barrel [for] WTI than the $90 a barrel level frequently cited by senior Saudis in recent weeks,” Oil investor T. Boone Pickens said Tuesday oil prices may rebound to $100 a barrel as early as next year. Citi’s best-case scenario for Brent prices is $80 a barrel. “If nothing bad happens, and OPEC doesn’t come together, then the outlook is decidedly bearish and Citi’s bear case puts Brent at $65 a barrel,” Morse said.