Intraday......, page-21

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Oil extends gains as U.S. crude inventories decline​

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Published: Dec 23, 2015 11:29 a.m. ET

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WTI widens premium over BrentGetty Images
Oil inventories likely fell by 3.6 million barrels last week, estimates show.

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By
SARASJOLIN

MARKETS REPORTER

JENNYW. HSU

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Oil futures continued their rebound off multiyear lows Wednesday, extending strong gains after data revealed U.S. crude inventories posted an unexpectedly large decline last week.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in February CLG6, +4.43% rose $1.51, or 4.2%, to $37.65 a barrel. February Brent crude on London’s ICE Futures exchange LCOG6, +4.21% gained $1.15, or 3.1%, to $37.26 a barrel.
Oil extended gains after the Energy Information Administration said crude stockpiles fell by 5.9 million barrels in the week ended Dec. 18. Analysts surveyed by The Wall Street Journal had penciled in a rise of 600,000 barrels, while the American Petroleum Institute, on Tuesday, reported a 3.6 million barrel decline.

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At the same time, crude stocks at the Nymex delivery hub in Cushing, Okla., rose by 2 million barrels. Gasoline stocks rose 1.1 million barrels, in line with forecasts, while distillates, including diesel and heating oil, fell by 661,000 barrels versus forecasts for a rise of 2.1 million barrels.
Oil was on the rise ahead of the data. OPEC early Wednesday released its closely watched World Oil Outlook, saying it expects the price of its basket of crude to rise to $70 a barrel in 2020 and to $95 a barrel in 2040.
The “need to develop oil production in more expensive areas will drive long-term oil prices higher,” the cartel said in its report.
On Tuesday, the price of West Texas Intermediate, the U.S. benchmark, rose above the price of Brent crude for the first time in years, with Brent settling at a new 52-week low. Analysts say the rising confidence in U.S. oil was partly boosted by the U.S. government’s last week decision to reverse a 40-year export ban on U.S. crude.
“For WTI, we believe that the market has gone on a buying spree as they play on the widening spreads between WTI and Brent. The market would unlikely stop until WTI-Brent spreads widen toward 50 cents for the front month,” said Daniel Ang, a Phillip Futures energy analyst.
Hopes for higher prices

The prospect of U.S. shale producers expanding into new foreign markets as the country is flushed with excess oil has raised hopes for higher prices.
The American Petroleum Institute estimates crude inventories in the U.S. likely fell by 3.6 million barrels last week. Still, at 490 million barrels, total crude inventory is at an eight-decade high, according to U.S. government data. Official figures will be released later on Wednesday.
See also: U.S. gas prices fall below $2—and in some places under $1.60
However, the potential additional cost of transporting U.S. oil from midcontinent by rail to costal refineries has prompted some analysts to take a bearish view, saying it might be cheaper for foreign oil users to source oil from West Africa.
“None of the potential for exports can be realized if the numbers don’t work,” he added.

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Moreover, unless there is a significant cut in output, the chronic issue of supply outstripping demand will continue to weigh on global prices well into next year, especially with additional Iranian oil returning to the market in the coming months, analysts said.
January gasoline futures RBF6, +6.78% rose 5.81 cents, or 4.9%, to $1.233 a gallon. January natural gas NGF16, +6.09% was flat at $1.888 per million British thermal units​