Mark Shenk, 04 November 2015

Oil advanced on speculation US refineries increased crude demand for a third week.

West Texas Intermediate futures rose as much as 4.6 per cent. Refinery utilisation rates probably rose by 0.3 percentage points last week, according to a Bloomberg survey. An Energy Information Administration report Wednesday is expected to show that crude stockpiles rose by the smallest amount in six weeks while gasoline supplies fell. Libya’s Petroleum Facilities Guard halted oil shipments from Zueitina port indefinitely amid the escalating conflict between the country’s two rival administrations, putting exports at risk.

Oil has slumped more than 40 per cent the past year amid speculation a global glut will be prolonged. OPEC members continue to pump above their collective quota while US output remains above 9 million barrels a day. Prices are near a bottom and global supplies look set to close the gap with demand amid declining output, according to Daniel Yergin, vice chairman at IHS Inc.

“Refiners are coming out of maintenance as quickly as possible, which is going to boost crude demand,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “We will all be keeping an eye on the crude output number. It’s almost as if we’re on a death watch, waiting to see it fall below 9 million barrels a day.”

WTI for December delivery rose $US2.04, or 4.4 per cent, to $US48.18 a barrel at 1.28pm on the New York Mercantile Exchange. Futures touched $US48.26, the highest since October 13. The volume of all futures traded was about 2 per cent below the 100-day average.

Brent for December settlement increased $US1.93, or 4 per cent, to $US50.72 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $US2.46 premium to WTI.

US crude inventories probably increased by 2.25 million barrels last week, a Bloomberg survey showed before Wednesday’s EIA report. Supplies are more than 100 million barrels higher than the five-year seasonal average

Gasoline lead energy futures higher. US stockpiles of the fuel probably dropped 1.13 million barrels in the week ended October 30, according to the survey.

December gasoline futures rose 7.11 cents, or 5.2 per cent, to $US1.4464 a gallon. Prices reached $US1.4476, the highest level since October 7.

The rise in crude and fuel futures bolstered energy company stocks. Exxon Mobil was up as much as 2.3 per cent to $US87.24, the highest since May, while Chevron Corp. surged as much as 3.5 per cent to $US98.30.

The number of active oil rigs in the US fell by 16 last week to 578, a five-year low, oilfield-services company Baker Hughes said October 30. Chevron said last week that it’s cutting about 10 per cent of its workforce and scaled back its long-term production target even as the company posted third-quarter profit that surpassed analysts’ expectations.

“The combination of cancelled projects and the decline in rigs are going to impinge on production,” Dan Heckman, senior fixed-income strategist in Kansas City, Missouri, at US Bank Wealth Management, which oversees about $US126 billion, said by phone. “The market is starting to factor a little of that into the price.”

US crude output, which surged to the most in more than three decades this year, will retreat by about 10 per cent in the 12 months ending April, according to Yergin, a Pulitzer Prize- winning author. Global oil supply and demand will begin to move into balance by late 2016 or 2017 and prices may rise to $US70 to $US80 a barrel by the end of the decade, he said in Tokyo on October 30.

Libya’s Tripoli-based National Oil Corp declared force majeure, a clause allowing it to suspend deliveries, on crude shipments from Zueitina. The country – where output has been curbed by conflict and protests – was the joint-biggest contributor with Saudi Arabia to an increase in OPEC production last month.

Extracted in full from the Australia Financial Review.