Oil up 2% despite US crude inventory rise

NEW YORK — Oil prices settled up 2% on Wednesday despite a rise in US crude inventories, with the market heading for its largest third-quarter gain in 13 years after the Iraqi oil minister said the Organization of the Petroleum Exporting Countries (OPEC) and its partners were considering extending or deepening output cuts.

Brent crude futures rose $1.06, or 1.90%, to $56.20 a barrel, while US West Texas Intermediate ( WTI) crude futures gained 93 cents, or 1.90%, to $50.41.

Crude prices were on course for a nearly 16% rise this quarter, which would make this year’s performance the strongest for the third quarter since 2004.

US crude oil stockpiles jumped last week as imports and output increased, the US Energy Information Administration (EIA) said, as operations resumed from the impact of hurricane Harvey which hit the Gulf Coast on Aug. 25.

Crude inventories rose for a third straight week, building by 4.60 million barrels, about a million more barrels than forecast.

“The impact of hurricane Harvey can still be seen in today’s larger-than-expected build in the US commercial crude stockpile,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics. “However, this has had limited impact in dissipating the bullish sentiment prevailing in the market.”

However, US crude remains range-bound around $50.

The Brent/ WTI spread widened 36 cents to settle at negative $5.60. Because of the depressed price of US crude compared to Brent, the spread is now the widest in more than two years.

“The hurricane widened it out,” said Rob Haworth, senior investment strategist at US Bank Wealth Management, pointing out that US inventories and global inventories have different narratives because of Harvey.

“If I look at this week’s EIA data, post hurricane… the refined products drawdown implies that refineries are not yet back to normal,” he said. “They’re not replacing inventories for current demand.”

Gasoline stocks fell 2.10 million barrels, the EIA said Wednesday, in line with analysts’ expectations, while distillate stocks inventories fell 5.70 million barrels, the biggest weekly draw since November 2011.

On Friday, OPEC and other producers will meet in Vienna to discuss the progress of their deal to limit output. The group is considering a range of options, including an extension of cuts, but it would be premature to decide on what to do beyond the agreement’s expiry in March, Iraqi oil minister Jabar al-Luaibi told an energy conference on Tuesday.

OPEC and non- OPEC producers including Russia have agreed to reduce output by about 1.80 million barrels per day until March to reduce global oil inventories and support prices. Some producers think the pact should be extended for three or four months, others want it to run until the end of 2018, while some, including Ecuador and Iraq, think there should be another round of supply cuts, al- Luaibi said. —