API Reports Seventh Large Crude Draw In Seven Weeks

Higher oil prices are allowing US shale producers to hedge and lock in drilling programmes

Oil prices ended higher on Wednesday ahead of the release of USA petroleum data that was expected to show a ninth straight weekly drawdown in crude inventories.

However, prices stayed below recent three-year highs as fuel supplies remain ample and as refineries scaled back operations. WTI Crude oil futures are quoting at $64.23 per barrel, up 0.45% on the day.

Both contracts climbed to their highest levels since December 2014 this week with Brent reaching $70.37 on Monday and WTI up to $64.89 on Tuesday.

Kuwait's oil minister Bakhit al-Rashidi said on Wednesday there is no plan or intention so far to exit from a production-cutting agreement among OPEC and non-OPEC oil producers.

Tighter markets have lifted both crude benchmarks about 13 percent above levels in early December, helped by production curbs by OPEC and Russian Federation, as well as by healthy demand growth.

In Nigeria, the militant group Niger Delta Avengers threatened to launch attacks on the country's oil sector in the next few days.

The tighter supplies come on the back of supply cuts by the Organisation of the Petroleum Exporting Countries (Opec) and Russian Federation, who started to withhold production in January past year.

Markets were also supported by a drop in available crude inventories. In November, oil ministers from OPEC and non-OPEC member nations agreed to extend output cuts for the duration of 2018.

"We expect an increase in global demand in 2018 by 1.5-1.6 million barrels a day, which exceeds our expectations", he said, indicating that an increased demand can allow the market to absorb all production, either from conventional or unconventional sources such as shale oil".

On the economic front yesterday, the United States industrial production increased more than expected in December as unseasonably cold weather at the end of the month boosted demand for heating.

"The upside is now limited for oil prices".

The API data also showed a well-supplied fuel product market, which could mean lower crude demand going forward.

He said Saudi Arabia's Foreign Minister Adel al-Jubeir had expressed support for the idea during a visit to Brazzaville on January 8.

This week, the API is reporting another, although smaller, build in gasoline inventories of 1.782 million barrels for the week ending January 12.

Official U.S. oil inventory and production data is due on Thursday from the Energy Information Administration (EIA).

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