by Alex Nussbaum
New York | Oil prices surged the most in seven weeks as declines in refined product inventories outweighed another increase in crude stockpiles.
Futures in New York rose 2.2 per cent on Wednesday trade in New York, clawing back some of their losses from the previous day’s rout. The Organisation of Petroleum Exporting Countries is due to meet with other major producers in Vienna next month, with Saudi Arabia proposing at least a 1 million barrel a day cut to stabilise prices.
The US Energy Information Administration said domestic crude inventories rose 4.85 million barrels last week. Still, that was about half the jump of the prior week and gasoline and distillate stores fell, suggesting demand for petroleum remains healthy.
“Overall, total inventories were down,’ said Craig Bethune, a senior portfolio manager at Manulife Asset Management in Toronto. “It’s been a fairly tough market already and this was better than the worst case people were expecting.’
Crude prices in London and New York collapsed along with equities on Tuesday amid worries about OPEC’s ability to orchestrate more cuts. Even with Wednesday’s rebound, oil has fallen more than 25 per cent since October.
The decline prompted Goldman Sachs analysts to warn the sell-off “has overshot current and forward fundamentals”, in a note to clients. Still, they said, “we continue to expect high price volatility until evidence that the oil market fundamentals are improving, requiring a decline in OPEC production and signs that demand growth is resilient”.
West Texas Intermediate for January delivery was up $US1.20 to $US54.63 a barrel at settlement on the New York Mercantile Exchange.
Brent for January settlement climbed 1.5 per cent to $US63.48 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at an $US8.85 premium to WTI.
Oil markets were optimistic enough to shake off another tweet from US President Donald Trump calling for prices to fall further. Trump said he won’t let the murder of journalist Jamal Khashoggi jeopardise US relations with the kingdom as crude may “go through the roof” if the partnership between the two nations breaks.
OPEC’s task in Vienna will be complicated by American shale-oil producers who are overcoming pipeline shortages and other logistical constraints more quickly than many had expected. The cartel may need to cut production by 1.4 million barrels a day, ceding market share to the US, OPEC has estimated.