U.S. crude prices rise on Cushing draw, Brent eases

Mae Love
February 21, 2018

The U.S. grade, of so-called light-sweet quality, had gone below Dubai in December 2016, when a historic output-cut pact involving OPEC and other producers including Russian Federation pushed the price of medium-sour Dubai crude above WTI.

According to the calculations of the Energy Information Administration (EIA), weekly production of raw materials in the USA rose to a historic high of 10.27 million barrels per day for the week by February 9.

Transactions on Monday will be booked Tuesday for settlement because of the U.S. Presidents Day holiday.

The Saudi energy ministry said that Saudi Aramco's crude output in March will be 100,000 barrels per day (bpd) below its February level while exports would be kept below 7 million bpd. The four-week moving average for exports is more than double the rate from the same period a year ago, federal data show.

Brent crude futures ended the session 42 cents, or 0.6 per cent, lower at $65.25 a barrel after trading between $65.81 and $64.78 a barrel.

To note, one barrel equals 158,988 liters.

Crude rallied last week following two straight weeks of declines.

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While normally sending the price of oil lower, API reported total US petroleum demand last month increased 5.5 percent from previous year for its strongest January in more than a decade.

Analyst William O'Loughlin said OPEC and Russian Federation had assured markets that there will be a systematic augmentation of output once the production cuts deal ends.

OPEC a few years ago was defending a market share with robust production, which tilted the market heavily toward the supply side and left the price of crude oil around $30 per barrel.

In the Singapore market, oil prices last Thursday extended gains from the previous session, pushed up by a weak dollar and comments from Saudi Arabia that it would rather see an undersupplied market than end a deal with the Organisation of the Petroleum Exporting Countries (Opec) and Russian Federation to withhold production. "Though the market likes OPEC and its allies' show of unity, we still need to see how USA shale companies will react on higher prices and eventually offset all the efforts of OPEC and others to reduce inventories"'.

Front month USA crude's discount to the second month flipped to a discount ahead of the March contract's expiration, falling to a low of a discount of 10 cents per barrel, the widest since December 11.

"Sentiment for US crude has improved in part from LOOP's very large crude carrier export capability, but fundamentally, falling Cushing stocks remains the main support for higher WTI prices", said Den Syahril, an analyst at industry consultant FGE in Singapore. Separate analysis emailed from UBS found demand, meanwhile, could be even more robust than initially projected.

U.S. oil output is on track for "phenomenal", growth, U.S. Deputy Energy Secretary Dan Brouillette said in an interview in London.

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