Brent slips from 2015 peaks, US crude up on inventory draw

NEW YORK: Brent prices fell on Wednesday while US crude rallied, after crude stockpiles in the world’s top oil consumer unexpectedly drew down with refiners coming back online following Hurricane Harvey last month.

Brent slipped from 26-month highs to settle down 54 cents (or nearly 1 percent) at $57.90 a barrel, while US West Texas Intermediate crude (WTI) ended 26 cents (or 0.5 percent) higher at $52.14 but stayed below five-month highs.

US crude inventories fell 1.8 million barrels last week, the US Energy Department said, versus forecasts for a 3.4-million-barrel build.

The crude draw supported oil prices, but gasoline stocks surprisingly rose and stocks of distillates were down by less than anticipated.

“Gains in WTI oil prices will be capped because of recovering oil production in the US,” Abhishek Kumar — a senior energy analyst at Interfax Energy’s Global Gas Analytics in London — said.

Refinery utilization rates jumped 5.4 percentage points to 88.6 percent of total capacity, the highest rate since Harvey hit on August 25, government data showed, as most facilities have come back online.

The effects of that storm, as well as Hurricane Irma — which struck Florida earlier this month — may dampen demand for some time, potentially increasing gasoline inventories while crude stocks are drawn down thanks to renewed refining activity.

Oil prices have been supported by output curbs by the Organization of the Petroleum Exporting Countries (OPEC) and other major producers, although US crude has lagged behind Brent amid concerns that US production-growth could stoke oversupply.

Data showed that US crude production rose to 9.55 million barrels per day last week — higher than levels before Harvey hit the Gulf Coast.

With Brent futures commanding their highest premium over WTI in more than two years, US crude has become increasingly competitive in foreign markets and exports hit a record of 1.5 million BPD last week, according to data.

“Seeing exports of US produced crude that large would pose a threat to the level that the Brent-WTI premium can go,” Gene McGillian — the manager of market research at Tradition Energy in Stamford, Connecticut — said.

Diesel exports were also rising, in part, because lower US crude prices boost margins for US refiners compared with those in Europe.