Published: Thu, April 11, 2019
Markets | By Otis Pena

Oil rallies as U.S. gasoline inventory draw offsets crude build

Oil rallies as U.S. gasoline inventory draw offsets crude build

Brent crude futures, the global benchmark for oil prices, were up $1.04, or 1.5%, at $71.65 per barrel around 2:30 p.m., after hitting a five-month high.

The Dutch bank said the reduction was not only down to voluntary supply cuts, which the group started this year to prop up prices, but also involuntary curbs from Venezuela and Iran - which are exempt from the OPEC cut pact - due to USA sanctions.

Global benchmark Brent futures settled at $71.73 a barrel, gaining $1.12, or 1.59 percent, after hitting a five-month high of $71.78 a barrel. U.S. West Texas Intermediate crude oil futures rose 64 cents, or 1%, to $64.62 per barrel, holding just below their strongest level since November.

Brent and WTI both hit their highest since November at $70.76 and $63.48 a barrel respectively early on Monday.

Oil prices have rallied by far this year, supported largely by the ongoing supply cut efforts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

As for Iran, the analyst said Washington's aim of bringing down the country's oil exports to zero was "unrealistic" and "possibly even delusional", adding that the higher prices rose, the more demand there will be for Iranian oil and it will "find an outlet".

Prices have been further lifted this week by escalating violence in Libya, a significant supplier of oil to Europe, which produced around 1.1 million barrels per day (bpd) of crude in March.

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"Declines from these two exempt countries account for nearly 47% of the reduction seen from OPEC", ING added.

In the United States, crude oil production has risen by more than 2 million bpd since early 2018, to a record 12.2 million bpd, with many analysts expecting output to exceed 13 million bpd soon.

"WTI has not seen the same strength (as Brent). given the relatively more bearish fundamentals in the US market", said ING bank.

USA crude exports have also risen, breaking through three million bpd for the first time earlier this year.

Despite the OPEC-led cuts and USA sanctions, not all regions are in tight supply.

At 456.5 million barrels, US crude oil inventories are at the five-year average for this time of year. The forecast cut 0.2 percentage point from the IMF's outlook in January.

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