Oil prices rose on Wednesday after data from the US Energy Information Administration showed a larger-than-expected drop in US crude stocks as well as a decline in gasoline and distillate inventories.  Apache photo.

Oil prices up slightly Wednesday

Oil prices rose on Wednesday on data from the US Energy Information Administration that showed a 4.1 million barrel decline in US crude stocks and surprise drawdowns in US gasoline and distillates inventories.

By 3 p.m., EDT, benchmark Brent crude futures rose 77 cents to $76.65/barrel and US West Texas Intermediate was up 29 cents to $66.65/barrel.  The Canadian Crude Index dropped $1.16 to $41.78.

Earlier in trading, Brent and US oil futures slumped on concerns over higher US production as well as expectations that OPEC will relax its supply cut agreement when the cartel meets in Vienna on June 22-23.

But, US EIA data released on Wednesday morning showed the decrease in US crude stocks had exceeded analysts’ expectations by 1.4 million barrels.  Also, the EIA data showed gasoline demand in the United States rose to a record high of 9.9 million barrels per day (b/d).

“The demand metrics here are amazing for crude oil and gasoline,” John Kilduff, a partner at Again Capital in New York told Reuters. “Put the exports of crude on top of that, and it’s just a really bullish report.”

The EIA reported crude production in the US jumped to 10.9 million b/d last week.  Kilduff says the market seems able to absorb the increase. “It seems like we need almost every barrel of that to keep up with this refining demand.”

And in June, Russia pumped over 11 million b/d and Saudi Arabia increased its production to over 10 million b/d.

“Saudi Arabia and Russia have already started to lift production,” Bjarne Schieldrop, analyst at Swedish bank SEB told Reuters. “Unofficial sources have said Russia will propose to return production back to the October 2016 (level), i.e. removing the cap altogether over a period of three months.”

On Wednesday, US President Donald Trump complained that OPEC is to blame for higher oil prices.  According to Reuters, Iran fired back and accused Trump of stoking volatility after the US President abandoned the Iran sanction relief deal last month.

The International Energy Agency said that in the longer term, the oil market could tighten if global demand increases and OPEC is unable to cover supply shortages.

The agency says global crude demand is expected to increase by 1.4 million b/d this year and in 2019.  By the fourth quarter of this year, the IEA says demand will top 100 million b/d.

The IEA said it expects global oil demand to grow 1.4 million bpd this year, and in 2019, and will top 100 million bpd in the fourth quarter of 2018.

“The market will be finely balanced next year, and vulnerable to prices rising higher in the event of further disruption,” the IEA said in its monthly report.

Reuters reports fund manager Pierre Andurand at Andurand Capital offered a very bullish position on Twitter Wednesday.

“Prices will be above $150 in less than two years,” said Andurand.