By Barani Krishnan
Investing.com – Looks like OPEC still wins, however U.S. crude inventories climb.
Oil prices jumped on Wednesday, supported by tensions in the Middle East linked to stealth attacks on Saudi oil tankers and pipelines that offset bearish sentiment earlier in the day over an unexpected .
, the benchmark for U.S. crude, were up 31 cents, or 0.5%, at $62.09 per barrel by 12:45 PM ET (16:45 GMT), after falling by $1 a barrel earlier.
, the global benchmark for oil, rose by 71 cents, or 1%, to $71.95.
The rebound in oil came despite predictions by the Paris-based International Energy Agency in its monthly report on Wednesday that the world will require very little extra oil from OPEC this year as booming U.S. output will offset falling exports from Iran and Venezuela.
The IEA estimated growth in global oil demand to average 1.3 million barrels per day in 2019. In contrast, U.S. production of oil and condensates alone was forecast to rise by an average of 1.7 million bpd this year, it said.
Crude futures have witnessed undue volatility in recent days as negative price drivers like the worsening U.S.-China trade war faced off with the rise in geopolitical tensions in the Arab world, which often tended to lend a premium to oil.
The OPEC cartel, which counts the world’s most influential oil producers like Saudi Arabia and UAE as members and others like Russia as allies, has struggled to hold on to this year’s oil-price gains after a remarkable rally of more than 30% in the first quarter. Year to date, WTI is up 37% while Brent shows a 34% gain.
On Wednesday, both WTI and Brent were initially down more than 1% after the American Petroleum Institute, in its weekly supply-demand snapshot issued late on Tuesday, said U.S. crude stockpiles surged more than 8 million barrels last week versus a drawdown expected by the market.
The EIA confirmed a surprise crude inventory rise, although not as large as that cited by the API.
, excluding those in the U.S. Strategic Petroleum Reserve, rose by 5.4 million barrels last week, versus expectations for a decline of 800,000 barrels, the EIA said. In the previous week, crude inventories fell by almost 4 million barrels.
The EIA also said that total motor decreased by 1.1 million barrels during the week ended May 10, against forecasts for a drop of nearly 300,000. In the earlier week to May 3, gasoline inventories fell by almost 600,000.
rose by 84,000 barrels last week versus expectations for a drop of around 1 million barrels. In the previous week, distillate stockpiles slid by almost 160,000 barrels.
“The EIA report was bearish due to the large crude oil inventory build. Both imports and exports of crude oil rose substantially, and refinery utilization rose back above 90%,” said John Kilduff, founding partner at New York energy hedge fund Again Capital.
“There was also a large increase in crude oil inventories at the Cushing, Okla., delivery hub, which adds to the bearishness,” he said
Tariq Zahir, partner at another New York-focused oil fund, Tyche Capital Advisors, said the inventory numbers reported by the EIA will not help the bullish case OPEC was trying to build for its oil.
“While draws were expected across the whole complex, we saw builds almost across everywhere,” Zahir said.
Just on Tuesday, the 14-member OPEC said in its monthly report that it had cut output again in April.
OPEC said it pumped 30.03 million bpd last month, or nearly 550,000 bpd less than in March.
It also forecast that total world oil supply will increase by 2.22 million bpd in 2019 versus demand growth of 1.21 million. The 1 million bpd difference could give the group legitimacy to extend production cuts at its June meeting with Russia and other world oil producers.
Since December last year, the OPEC+ alliance of world oil producers have been shedding about 1.2 million bpd in supply to help oil prices recover by nearly 40% this year after the market had lost about as much in just the fourth quarter of 2018 on oversupply.
Retail gasoline prices were up slightly on Wednesday, according to the American Automobile Association. The national average price of unleaded gasoline was $2.862 a gallon, up from $2.86 a gallon on Tuesday. The average is up 26.3% this year.