NEWS
Oil prices finished at the highest level in months Wednesday, buoyed by tensions between the U .S. and Iran and expectations that OPEC will decide to extend its production-cut deal.
Prices, however, finished off the session’s highs on the heels of a third-straight weekly jump in U.S. crude supplies, a hefty rise in production, and a rise in the dollar as the U.S. Federal Reserve signaled one more interest-rate hike this year. A further climb for oil would have to be “fueled by talk in the upcoming weeks” on whether the Organization of the Petroleum Exporting Countries’ production-cut deal will be extended “or if consensus starts to increase the amount of cuts,” said Tariq Zahir, managing member at Tyche Capital Advisors.
U.S. benchmark October West Texas Intermediate crude which expired at the day’s settlement, rose 93 cents, or 1.9%, to settle at $50.41 a barrel on the New York Mercantile Exchange—the highest finish for a front-month contract since May 24, according to FactSet data. It had traded as high as $50.65 during the session. November WTI crude ended at $50.69, up 79 cents, or 1.6%. November Brent crude the global benchmark, advanced $1.15, or 2.1%, to $56.29 a barrel on the ICE Futures Europe exchange, the highest since early March.
A report from U.S. Energy Information Administration Wednesday showed that domestic crude supplies climbed by 4.6 million barrels for the week ended Sept. 15. That topped the forecast for a rise of 2.4 million barrels by analysts surveyed by S&P Global Platts. The American Petroleum Institute had reported late Tuesday an increase of 1.4 million barrels.
“Nearly a month after Hurricane Harvey made landfall in South Texas, the data are finally signaling a return to more normal operations in the region,” said Troy Vincent, oil analyst at ClipperData. The EIA also said total domestic crude output rose by 157,000 barrels a day to 9.510 million barrels a day. The rise in production was “quite a surprise” in the wake of Hurricane Harvey, said Zahir. “Shale [output] has shown how fast it can come back online.” Gasoline stockpiles were down 2.1 million barrels for the week, while distillate stockpiles fell 5.7 million barrels, according to the EIA. The S&P Global Platts survey forecasts a fall of 800,000 barrels for gasoline and a 1 million-barrel draw for distillates. Matt Smith, director of commodity research at ClipperData, told Market Watch that the “solid build to crude stocks was due to ongoing lower crude demand via the medium of stymied refinery runs, and buoyed by [a Strategic Petroleum Reserve] release” of oil. Still, “refinery runs rebounded a solid 1.2 million barrels per day, in whole part due to returning refining activity on the U.S. Gulf,” he said.
Traders have also been eyeing comments from major oil producers as OPEC and non-OPEC participants in the output cut deal are set to meet in Vienna Friday to review compliance with the agreement, which is set to run through March 2018. Some cartel members—including less compliant nations like Iraq—have indicated in recent weeks that they would be open to extending the production cuts after the deal expires early next year, but analysts and investors don’t expect a final decision until OPEC’s next official gathering in November.
Meanwhile, oil prices likely got an added boost in the wake of comments from President Donald Trump on Iran’s nuclear deal. “There’s been a lot of chatter about Trump and Iran with their president tweeting back at Trump today,” said Colin Cieszynski, chief market strategist at CMC Markets. “This could be firing up Middle East tensions.”
Have a great day,
Loren R. Bailey, President
Fuel Manager Services Inc
Office: 479-846-2761
Cell: 479-790-5581
