Crude Oil Rises Sharply on Inventories, UAE Export Cuts

© Reuters.

By Geoffrey Smith 

Investing.com -- Crude oil prices bounced sharply on Wednesday on a cocktail of factors from hurricanes and inventory data to global growth forecasts, almost all of which had bullish implications.

By 9:20 AM ET (1320 GMT), U.S. crude futures were up 2.8% at $39.34 a barrel, while the global benchmark Brent was up 2.4% at $41.51 a barrel.

U.S. Gasoline RBOB Futures were up 1.6% at $1.1565 a gallon.

The market was enjoying tailwind from various sources, starting late on Tuesday as the American Petroleum Institute surprisingly estimated a 9.5 million draw in U.S. crude stockpiles last week, confounding expectations for a rise of 2.0 million barrels.  The Energy Information Administration’s data for the week, due for release at 10:30 AM ET, may be scanned more closely than usual for corroboration.

Stockpiles could come under pressure again this week, with the Bureau for Safety and Environmental Enforcement estimating that over a quarter of production in the Gulf of Mexico is shut in due to Hurricane Sally. The storm front has made landfall in Alabama and appears to pose no threat to refineries further west along the Gulf coast.

Overseas, prices were supported by the national oil company of Abu Dhabi, the biggest exporter in the United Arab Emirates, saying that it would cut the amount of crude available for export by 25% in October, with cuts extending into November. The UAE had produced above its quota agreed under the ‘OPEC+’ output pact in September due to high domestic demand for power and needs to compensate for the overproduction.

A technical committee convened by the OPEC+ bloc is due to review overall compliance with that deal in Vienna Tuesday, before a ministerial meeting on Thursday. Newswires reported that the signatories were broadly in line with their commitments, suggesting that there is little risk of any change to the group’s output policy.

There was also brighter news on the demand front, after two reports from OPEC and the International Energy Agency suggesting that it is stalling. The Organization for Economic Cooperation and Development revised its estimates for the world economy upward to project a contraction of only 4.5% in gross domestic product this year, rather than the 6% it had expected in June.

The difference was largely due to upward revisions in China and the U.S., the world’s two biggest oil consumers.

The upward revision means that next year’s growth will be around 5.0% rather than 5.2%, the OECD said. It could still be two or three percentage points lower if governments reimpose widespread lockdowns to contain the coronavirus, it added.