21 May 2014, News Wires – Brent futures edged higher towards $110 per barrel on Wednesday, supported by violence in Opec oil producer Libya and industry data showing an unexpected draw in US crude inventories.
US crude stocks fell last week as refineries boosted output, while gasoline inventories increased and distillate stocks built, data from industry group the American Petroleum Institute showed. Investors will now be watching closely to see if official data from the US Department of Energy’s Energy Information Administration (EIA) confirms the big drop.
“We are ramping up for the summer driving season, so a draw in crude stocks shouldn’t come as a surprise,” said Tony Nunan, oil risk manager at Mitsubishi in Tokyo.
“We went from a strong winter more or less right into the summer driving season, so I think this will continue to support crude oil,” he said.
Brent crude gained 20 cents to $109.89 a barrel early on Wednesday, after it settled 32 cents higher.
US crude for July delivery rose 63 cents at $102.96 a barrel, after it settled 22 cents up in the previous session. US crude for June delivery, which expired Tuesday, settled 17 cents lower at $102.44, after hitting its highest price in nearly a month on Monday.
The fragile situation in Libya continued to provide support for global oil prices, with new fighting breaking out in the capitol Tripoli early on Wednesday, according to witnesses, two days after gunmen stormed parliament in the worst violence in months.
Libyan authorities have proposed a June national election as the government seeks to resolve a standoff involving powerful brigades of former rebel fighters who defy state authority.
Production at the country’s western El Feel and El Shahara oilfields is still shut more than a week since the government said protests there were over. National output was around 210,000 barrels per day.
Crude inventories in the US fell by 10.3 million barrels in the week ended 16 May, with stocks at the Cushing, Oklahoma, delivery hub falling by 261,000 barrels according to the API data. In comparison, a Reuters poll of analysts had shown expectations that stockpiles likely rose by 800,000 barrels to their highest in more than 20 years.
“With US shale (production) growing at a million barrels per year, that has been keeping a lid on a market full of geopolitical uncertainty and the main reason oil prices haven’t gone up more,” said Nunan.
US commercial gasoline stocks were also seen rising in the week to 16 May, while distillate inventories declined, the Reuters poll of nine analysts showed.
The more closely watched EIA data will come out later on Wednesday.
The conflict in Ukraine also continued to support oil prices, after a senior Russian official said the upcoming presidential election in Ukraine on 25 May could deepen political divisions, casting doubts on whether Moscow will consider the election legitimate.
The West has imposed sanctions against Russia, the world’s biggest oil producer, over its involvement in the conflict in Ukraine. A dispute between Moscow and Kiev over gas prices could impact shipments of Russian natural gas to Europe.