Why US Crude Oil Inventories Rose Again



Oil had its biggest weekly gain since late July as Texas refineries recovering from Hurricane Harvey processed more crude and global demand forecasts brightened.

That was followed by a report from the International Energy Agency (IEA) saying the glut was shrinking thanks to strong European and USA demand, as well as production declines in OPEC and non-OPEC members.

The Vienna-based Opec recently forecast higher demand for its oil in 2018 and pointed to signs of a tighter global market, indicating its deal with non-Opec states to cut output is helping tackle a glut.

"This boost to the market is attracting fresh speculative length", said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.

U.S. West Texas Intermediate crude (CLc1) briefly broke above $50 a barrel and settled 59 cents, or 1.2 percent, higher at $49.89, its highest close since July 31. The contract looked set for a nearly 5% weekly gain, its strongest performance in almost two months. In the previous week, speculators raised their crude oil net longs. United States crude oil (DBO)(DIG)(SCO) prices rose on September 13 despite the larger-than-expected rise in inventories.

Are US Crude Oil Supply and Demand Tightening?

Drillers cut seven oil rigs in the week to September 15, bringing the total count down to 749, the least since June, General Electric Co's Baker Hughes energy services firm said in its closely followed report.

"The IEA (International Energy Agency) revising up its 2017 global oil demand growth forecast, together with persistent weakness in the US dollar index, has prompted bullish sentiment in the oil market".

The post-Harvey refinery recovery is underway, however, as data earlier in the week from IHS Markit indicated that 13 of 20 affected USA refineries were restarting operations.

Despite the USA refinery outages, 2017 is set to be an "extremely strong year" for oil demand growth, a key factor underpinning a rise in prices, according to analysts at HSBC. With the lack of new major project sanctions, the bank analysts expect conventional non-Opec supply to start declining post-2018 and maintain their 2018 and 2019 Brent price assumptions at $65 and $70 a barrel, respectively.