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London - Oil held above $50 a barrel as a decline in US fuel inventories countered a bigger-than-forecast increase in crude stockpiles.
November futures dropped 0.5% in New York after climbing 1.6% on Wednesday. Gasoline supplies dropped a third week to the lowest level since November 2015, while distillate stockpiles fell by the biggest amount since 2011, according to government data.
Crude inventories expanded by 4.59 million barrels last week, more than the 3.9 million-barrel gain projected in a Bloomberg survey. US oil production also rose a second week.
While crude has rebounded this month, prices have struggled to hold above $50 a barrel this year as rising US output stifles supply curbs by the Organisation of Petroleum Exporting Countries.
An OPEC ministerial meeting in Vienna on Friday will discuss the possibility of extending the cuts beyond March, Algeria Press Service cited Algeria’s Energy Minister Mustapha Guitouni as saying, while Saudi Arabia and others have mooted a possible extension. Meanwhile in the US, Secretary of State Rex Tillerson has highlighted flaws in the 2015 international nuclear deal with Iran.
“The market focused on the sharp recovery in crude demand implied” by the decline in fuel inventories on Wednesday, said Jens Naervig Pedersen, a senior analyst at Danske Bank in Copenhagen. “It adds to the bullish sentiment buoyed by concerns about the Iran nuclear deal and headlines about OPEC looking at a possible extension of output cuts.”
West Texas Intermediate for November delivery was at $50.42 a barrel on the New York Mercantile Exchange, down 27 cents, at 12:47. Total volume traded was about 36% below the 100-day average. The October contract expired on Wednesday after gaining 1.9% to close at $50.41.
Brent for November settlement lost 27c to $56.02 a barrel on the London-based ICE Futures Europe exchange, after advancing $1.15 on Wednesday. The global benchmark crude traded at a premium of $5.63 to WTI.
US gasoline stockpiles fell by 2.13 million barrels last week to 216.2 million, the Energy Information Administration reported on Wednesday. Distillate inventories, a category that includes diesel, dropped by 5.69 million barrels. Crude output expanded by 157 000 barrels a day to 9.51 million a day.
Tillerson this week laid out the case to European allies about flaws in the 2015 Iranian nuclear accord, hours after President Donald Trump said he’s made his decision about whether to walk away from the pact, without revealing what it was. Trump called the deal “an embarrassment to the United States” in his speech to the United Nations General Assembly on Tuesday.
“We could see some payback in oil prices in the short term,” Pedersen said. “But concerns about a pullback of the Iran nuclear deal will make it difficult for the market to sell oil, even at these levels.”
Oil-market news:
• The OPEC/non-OPEC Joint Technical Committee meeting in Vienna concluded that the average compliance with agreed production cuts in August was 116%, according to two delegates.
• Gulf Coast refiners that spent billions over the last two decades on plants designed specifically to process Venezuela’s cheap, tar-like crude are starting to come home to American light oil.
• Global gasoline market “is set up for a tight autumn, at least until demand ebbs seasonally” and refineries return from both planned and unplanned maintenance, Energy Aspects said in research note.
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