Oil prices were mixed on Wednesday with West Texas Intermediate rising after the US Energy Information Administration reported a drop in US crude stocks.  Brent prices slipped ahead of the OPEC meeting scheduled for later in the week.  Statoil photo.

US oil prices up over 1 per cent

US oil prices rose on Wednesday after government data showed a drop in domestic crude inventories.  Brent crude prices dropped as the oil market waits to learn the outcome of the upcoming OPEC meeting in Vienna later this week.

By 2:23 p.m., EDT, US crude prices were up 80 cents to $65.70/barrel and Brent crude dipped 40 cents to $74.68/barrel.  The Canadian Crude Index rose $1.10 to $40.38.

According to the US Energy Information Administration, US crude stocks fell by 5.9 million barrels last week.  This is the second-largest drop in oil inventories since January.  The EIA also reported refiners’ crude runs hit 17.7 million barrels per day (b/d), the highest on record for this time of year.

“A jump in refinery runs to 17.7 million b/d – just shy of the all-time record set last summer – has yielded the biggest weekly draw to crude stocks since January,” Matthew Smith, director of commodity research at ClipperData told Reuters.

“Given the lofty heights of refining activity, we shouldn’t be too surprised to see solid builds to both gasoline and middle distillates.”

US WTI crude futures for July delivery, which expires on Wednesday, were up 84 cents to $65.91/barrel.  WTI futures for August rose 64 cents to $65.54.

August delivery Brent crude futures were down 62 cents to $74.46/barrel.

A drop in Libya’s crude production underpinned oil prices on Wednesday.  Clashes at the country’s Ras Lanuf and Es Sider oil terminals have resulted in a drop in production from over 1 million b/d to between 600,000 to 700,000 b/d.

As well, attacks have resulted in the loss of a 400,000 barrel storage tank in Libya.

Both Ras Lanuf and Es Sider ports have been closed since June 14 and a force majeure has been declared on exports following attacks by groups opposed to Khalifa Haftar’s Libyan National Army (LNA).

The markets’ response to disruptions in Libyan production is outweighed, however, by Friday’s OPEC meetings in Vienna where the cartel will meet with Russia to discuss easing the supply cut agreement.

After Saudi Arabia’s Energy Minister Khalid al-Falih said the crude market will call for more oil in the second half of 2018 and that OPEC was near to a good decision on policy this week, Brent futures fell.

“Any developments on OPEC can move us,” Phil Flynn, analyst at Price Futures Group told Reuters.

According to Reuters’ sources, Saudi Arabia is trying to convince its fellow cartel members that they need to raise production.  Russia is also lobbying to relax supply curbs that were implemented in January 2017 and have revived oil prices.

But, some OPEC members, including Iran are against boosting production as they fear oil prices will drop.

Iran did signal that it could agree with a small increase in OPEC’s output as some cartel members had overdelivered on their supply cut pledges.

This could mean producers like Saudi Arabia could modestly increase their production.

“Brent is following the OPEC story much more closely than WTI,” Rob Haworth, senior investment strategist for US Bank Wealth Management told Reuters.