The Department of Energy also said that United States oil production fell by 23,000 barrels per day to 8.80 million barrels per day last week, down from 9.6 million barrels last June. EIA data also said U.S. crude output plunged to the lowest level since September 2014 at 8.8 million barrels a day.
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Global benchmark Brent crude futures were down 32 cents at $47.76 a barrel at 0833 GMT while U.S. West Texas Intermediate crude futures traded at $46.20 a barrel, down 50 cents day on day.
Oil sands companies around Fort McMurray began to restart operations on Tuesday after an out-of-control wildfire forced a week-long shutdown.
Oil prices were also supported by ongoing supply outages in Canada due to massive wildfires in the country’s oil-rich Alberta Province, as well in Nigeria, where militant attacks on oil facilities have squeezed crude exports.
Globally, supply cuts and disruptions in the Americas, Asia and Africa have significantly tightened the market in recent weeks, virtually eliminating a global supply overhang which rose as high as 2 million barrels per day over the past year. Royal Dutch Shell resumed production in the area on Tuesday and others looked to restart as fix crews assessed damage.
Brent settled nearly 4 percent lower, with US crude down nearly 3 percent. This has at least temporarily wiped out a glut that emerged in mid-2014 and pulled down prices by around 70 percent before a recovery started early this year. Gasoline stocks fell 1.2 million barrels, compared with analysts’ expectations for a 710,000-barrel drop.
Aside from these very recent events, crude oil prices have generally been rising in a sharp uptrend channel since January as USA oil production has slowed substantially.
The prices of crude oil across the world is taking a nose dive again, falling from 2016 highs to the mid-forties on Monday. At 540.0 million barrels, USA crude oil inventories remain at historically high levels for this time of year.
Oil markets extended their gains after the data. Distillates consist of diesel fuel and heating oil.
“The narrative has shifted back to the supply build after the pinch in supply due to disruption in the oil sands and in Libya and Nigeria”, Michael Hewson, chief market analyst at CMC Markets, said.
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“Changes in Saudi Arabia oil leadership only underscore the shift in strategy to one focused on market share over price”, Morgan Stanley said.
