LONDON (Reuters) – Oil prices edged higher on Friday as a rise in stocks of refined petroleum products offset a big fall in U.S. crude inventories to the lowest level since 2015.
Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. REUTERS/Nick Oxford
Brent crude futures firmed 32 cents to $76.82 a barrel by 1204 GMT. U.S. West Texas Intermediate (WTI) crude futures rose 11 cents at $67.88 per barrel.
Both contracts were set for their first weekly loss in three.
U.S. commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to Aug. 31, the lowest since February 2015, U.S. Energy Information Administration (EIA) data showed on Thursday.
But sentiment suffered due to a rise in refined product stocks coupled with relatively weak demand for fuel during this summer’s U.S. driving season – when consumption normally peaks.
Gasoline stocks rose by 1.8 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 3.1 million barrels, the EIA said.
“(Gasoline) stocks … are now 3.5 percent above the year-ago level. More worryingly, the surplus to the five-year norm now stands at 5.4 percent, the highest since June 2017,” Stephen Brennock of London brokerage PVM said.
“This bears all the hallmarks of a disappointing summer driving season. As a result, the alarm bells are now ringing that a gasoline glut will persist for the foreseeable future,” he added.
On the supply side, U.S. crude oil production last week remained at a record 11 million barrels per day (bpd), a level it has largely been at since July.
Outside the United States, U.S. sanctions against major oil producer Iran are fuelling expectations of a tighter market towards the year-end.
“The main driver of oil prices, in our view, remains the reimposition of U.S. … sanctions against consumers of Iranian oil,” Standard Chartered said this week.
“We have cautiously subtracted only 500,000 bpd from Iranian supply, assuming its production at 3.3 mln bpd for 2019 and 2020,” SEB Markets commodities analyst Bjarne Schieldrop said.
Saudi Arabia will need to keep production between 10.5 million bpd and 10.7 mln bpd to the end of 2020 “to prevent oil prices from spiralling higher”, he added.
Washington has indicated it may offer temporary sanction waivers to allied countries that are unable to cease imports immediately from Iran.
Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson and Louise Heavens