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Crude Oil Prices Settle Higher as Production, Supplies Fall

Investing.com

Investing.com – Crude oil prices settled higher on Wednesday as traders cheered an unexpected drop in US production while data showing crude stockpiles fell for the eighth-straight week lifted sentiment.

On the New York Mercantile Exchange crude futures for January delivery rose 0.97% to settle at $63.57 a barrel, while on London's Intercontinental Exchange, Brent gained 0.44% to trade at $69.12 a barrel.

Crude oil prices continued their bullish start to the week as traders cheered signs of ongoing tightening in domestic crude oil supplies which offset a larger-than-expected build in both gasoline and distillate stockpiles.

Inventories of U.S. crude fell by roughly 4.95 million barrels for the week ended Jan. 5, beating expectations for of a draw of 3.44 million barrels.

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Gasoline inventories – one of the products that crude is refined into – rose by 4.14 million barrels, well above expectations for a rise of 2.62 million barrels, while supplies of distillate – the class of fuels that includes diesel and heating oil – rose by 4.3 million barrels, confounding expectations for a rise of just 1.46 million barrels.

For tax purposes refiners tend to ramp up activity at the end of the year burning through crude supplies but this activity traditionally slows down in January, supporting a build in product inventories.

Investor fears of rising US production capped upside momentum, however, despite data showing U.S. output fell by nearly 300,000 barrels a day to 9.49 million barrels a day (bpd). Production is expected to hit 10 million bpd next month as rising oil prices attract US shale producers to ramp up output.

Goldman Sachs said it expects the rally in oil prices to meet a ceiling around $70 per barrel as the “new oil order” of shale producers is well underway. Shale producers’ are enjoying significant gains as costs average about $50 to $55 per barrel, the bank added.

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