Yesterday, oil prices rallied towards their highest levels this year after the Department of Energy (DOE) reported a weekly drop in US crude oil inventories. Also, the prospect of losing Iranian supply added to concerns over the delicate balance between consumption and production.
The DOE reported its weekly petroleum statistics yesterday morning and the biggest takeaway was a 5.3 million barrel draw in crude oil. The number seems large, however, the American Petroleum Institute (API) estimated a draw of 8.5 million. Gasoline stocks built 1.3 million barrels, which again underachieved the expectations of API, which predicted a build of 2.1 million barrels. Distillates recorded a build of 6.2 million barrels, which was slightly bearish compared to API’s estimate of 5.8 million build. Refinery runs increased by a whole percentage, increasing refinery capacity to just under 98% (97.6 %.). Cushing crude oil stocks built 1.2 million barrels.
According to Gordon Gray, HSBC’s global head of oil and gas equity research, we can expect the price of oil to continue to rise, potentially getting to significant figures. Gray says, “While we aren’t explicitly forecasting Brent to rise to $100 a barrel, we see real risks of this happening. The fact that much higher supply is already needed from the likes of Saudi Arabia – and the low levels of spare capacity remaining – leave the global system highly vulnerable to any further significant outage.” Iran is the main culprit of the worldwide supply issue, as traders have shifted their focus on the impact US sanctions against Iran can have on oil exports.
Yesterday, WTI crude oil settled up $1.12 to $70.37/barrel, RBOB increased $0.0206 to $2.0348/gallon, and ULSD increased $0.0057 to $2.2577/gallon. It will be very interesting to see how energy prices will react with Florence right around the corner.
