Crude Oil Prices Gravitate Toward $50/b As U.S Stockpiles Fall By 4.2m Barrels

Oil prices on Wednesday rose towards $50 a barrel — a level they have not hit in seven months — as U.S. crude inventories fell more than expected.
U.S. commercial crude stockpiles fell by 4.2 million barrels to a total of 537.1 million in the week through May 20, the U.S. Energy Information Administration reported.
On Tuesday, the American Petroleum Institute reported crude inventories fell by 5.1 million barrels, compared with expectations for a 2.5 million-barrel decline.
Total motor gasoline stocks rose by two million barrels, while distillate fuel oils fell by 1.3 million barrels, EIA said.
U.S. crude oil production also continued to tick down, EIA’s weekly data showed.
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Brent crude futures were up 73 cents at $49.34 a barrel by 10:33 a.m. ET (1433 GMT), while U.S. crude futures rose 60 cents to $49.22 a barrel.
A series of outages around the world, such as wildfires in Canada and a spate of violence in Nigeria’s oil-producing region, has helped cut global oil supply by nearly 4 million barrels per day this month.
Although these hitches are temporary, they have contributed to a drop in the supply glut that has plagued the market for nearly two years.
“We are definitely moving out of this surplus situation that we’ve been living in since mid-2014. There will still be some time, maybe six months of surplus, but then we’re basically into rebalancing,” SEB head commodities strategist Bjarne Schieldrop said.
“There have been losses in equities and especially emerging markets (this month) and still oil is up, so it’s definitely about oil fundamentals, rather than tailwinds from equities and currencies,” he said.
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Strikes across France that crippled output from most of the country’s eight refineries have had little impact so far on crude oil prices, but rather helped lift refining margins for diesel and gasoline.
Some of the U.S. drawdown was caused by falling imports due to the fires in Canada, which cut production by about 1.5 million barrels per day, said Ben Le Brun, market analyst at Sydney online brokerage OptionsXpress. Some crude producers restarted operations on Tuesday in Canada’s energy heartland.
“A strong U.S. economy is (also) good for oil consumption and demand,” Le Brun said.
Masanobu Hamada, general manager of the crude oil trading department at JX Nippon Oil & Energy Corp, said the current price rise was due to supply disruptions.
“Unless there is a halt in supply, the market lacks material (strength) to go higher because the inventory levels are high,” Hamada said.

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