Published: Wed, January 10, 2018
Money | By Armando Alvarado

Oil prices up following crude inventories' fall

Oil prices up following crude inventories' fall

Crude inventories fell by 4.9 million barrels in the week to January 5, compared with analysts' expectations for a fall of 3.9 million barrels. The best grades of US crude are now priced at almost $63 a barrel, high enough to convince shale oil producers to expand drilling and production.

American drillers will pump enough oil in 2019 to potentially surpass Saudi Arabia's output and rival the world's current top producer, Russia, according to a forecast from the U.S. Department of Energy.

A knee-jerk drop sent Brent crude oil to an intra-day low of $68.75 a barrel, but it soon recovered to trade around $69 again.

That would match the all-time monthly record of 10.04 million bpd set in November 1970; oil production declined after that as the United States increasingly relied on imported crude.

The remarkable gains were driven by the American Petroleum Institute claiming that domestic oil inventories dropped by 11.2 million barrels last week; if this figure is confirmed by the Energy Information Administration (EIA) on Wednesday, it will be the largest draw for this time of year since 1999 and almost triple what had been estimated in a Bloomberg survey.

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Canada's National Energy Board reported Canadian crude rail shipments to the USA totaled 137,000 BPD in October, a six-month high. Analysts had expected a smaller, 2.625-million-barrel build.

The continued drop in US crude oil inventories comes as the country continues to ramp up production, hitting the second highest production level of 2017 in the last week of December with 9,782 million barrels per day. Still, gasoline inventories in the prior week, to December 29, 2017, rose by 4.8 million barrels.

It look likes the hedge funds are on the right side of the market.

On Wednesday, the U.S. Energy Information Administration will release its inventories report for the week-ending January 5. They see production this year at 10.27mbpd compared to 10.02m in their previous estimate.

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