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Oil Rises On Large Crude Draw

Irina Slav

Crude oil prices rose higher after the Energy Information Administration reported an inventory draw of 5.5 million barrels for the week to December 20 in its last weekly petroleum status report for 2019.

At 441.4 million barrels, inventories were some 2 percent above the seasonal average, the EIA said.

The authority also reported average refining rates of 17 million bpd for last week, which compared with 16.6 million bpd a week earlier. Gasoline production averaged 10.3 million bpd and distillate fuels production stood at 5.4 million bpd. These compared with 9.8 million bpd of gasoline and 5.1 million bpd of distillate fuels a week earlier.

Gasoline inventories, the EIA said, added 2 million barrels in the week to December 20. This compared with a build of 2.5 million barrels for the previous week.

Distillate fuel inventories declined by 200,000 barrels. This compared with an increase of 1.5 million barrels for the previous week.

Prices shot up earlier this week, after the American Petroleum Institute reported an estimated 7.9-million-barrel crude oil inventory draw for the week to December 20. Since this was substantially more than analysts expected—1.83 million barrels—prices reacted by jumping to three-month highs.

At the time of writing Brent crude was trading at $66.60 a barrel and West Texas Intermediate was trading at $61.47 per barrel, both down modestly from the opening of trade on Friday.

Despite this rally, expectations for 2020 remain mixed. Analyst forecasts for Brent’s average next year vary from $59 to $70 a barrel, and the EIA sees WTI trading at an average discount of $5.50 per barrel to the international benchmark. The authority expects Brent at an average of $63 per barrel in 2020.

This would be a lower average than this year’s Brent crude level and that’s despite the thawing in U.S.-Chinese trade relations that has already resulted in a deal. This is not a positive sign for oil prices, as this year, the U.S.-China trade war was the lead factor that drove price movements.

By Irina Slav for Oilprice.com

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