The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and rival oil exchange traded products were boosted Wednesday following some of the most positive supply data this year.
“The U.S. Energy Information Administration reported that gasoline stockpiles fell by 8.4M barrels in the week ended Sept. 8, while stocks of distillates fell by 3.2M barrels, also exceeding analyst expectations; meanwhile, U.S. refineries ran at at only 78% of operable capacity, allowing commercial crude oil stocks to rise by 5.9M barrels to 468.2M,” according to Seeking Alpha.
While the Organization of Petroleum Exporting Countries have moved to cut production, expectations of continued U.S. shale production remain a deterring factor. Nevertheless, recent U.S. inventory drawdowns, which if sustained, could support the current price levels.
On Tuesday, the “International Energy Agency said August global oil supplies fell for the first time in four months, while also upwardly revising its 2017 oil demand estimate to 1.6M bbl/day from its July estimate of 1.5M bbl/day,” reports Seeking Alpha.
Current OPEC compliance with production cut plans remains above their historical average, and it usually takes between two to three quarters for inventories to normalize after the cuts. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the U.S. could at least keep oil prices steady around current levels in the second half of 2017.
“OECD demand growth continues to be stronger than expected, particularly in Europe and the U.S.,” said the IEA. “Based on recent bets made by investors, expectations are that markets are tightening and that prices will rise, albeit very modestly.”
Advances in U.S. shale oil production technologies are contributing the to supply surplus and weighing on any oil price gains. It has become much cheaper for the upstart U.S. shale producers to extract oil out of the ground, but the growth rate of U.S. oil product has also recently slowed.
“On the supply side, global oil output fell by 0.72 million bpd in August due to unplanned outages and scheduled maintenance in OPEC member Libya as well as non-OPEC states such as Russia, Kazakhstan, Azerbaijan and Mexico, as well as in the North Sea,” according to Reuters.
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