OIL: Prices rise after plunge, but output is still a concern

Oil prices climbed as much as 3 percent Thursday after the Energy Department reported a sharp drop in crude and gasoline inventories, but they retreated somewhat as traders shifted their focus to rising production that could slow the draining of the worldwide oil glut.

Crude settled in New York at $45.52, up 39 cents, or about 1 percent, after Wednesday’s plunge of about 4 percent.

Oil prices, after rising above $50 a barrel earlier in the year, have since fallen and languished as global supplies remain abundant. Crude prices are down about 20 percent from their February high of $54 a barrel.

The weekly inventory report provided some relief from the recent gloom in oil markets. The Energy Department reported that the nation’s oil stockpiles shrank by 6.3 million barrels in the last week of June while gasoline stocks fell by 3.7 million barrels. Total petroleum inventories dropped by 13.4 million barrels.

The across-the-board decline in oil and product stockpiles appeared to be a sign that oil traders were waiting to see after crude inventories rose a few weeks ago. But that sign was clouded by another rise in U.S. production, which increased 88,000 barrels a day from the previous week to more than 9.3 million barrels a day, the Energy Department reported.

Since prices came off their bottom in February, drillers

have flocked to U.S. shale fields. The rig count has more than doubled from its May low of just over 400, and climbed for 23 consecutive weeks until last week when it slipped by one to 940, according

to the Houston energy services company Baker Hughes.

Against this backdrop, Saudi Arabia’s national oil company, Saudi Aramco, reported record production last year, ahead of the OPEC production cut that went into effect Jan. 1. The state-owned oil company reported production of 10.5 million barrels a day last year, a 3 percent increase over 2015.

The report comes in the wake of a recent decision by OPEC and its partners to extend production cuts of 1.8 million barrels a day into next year.

At the same time Saudi Arabia is in the midst of a move to diversify its economy away from oil, with plans to sell shares in Aramco for the first time in history. Aramco, the world’s largest oil company, had 2016 production equivalent to the combined production of Exxon Mobil, BP, Chevron, PetroChina and Royal Dutch Shell.

Saudi leaders have indicated the company would sell up to 5 percent of the company publicly, an IPO that could be worth close to $1 trillion, analysts estimate.