USA crude inventories rose by 252,000 barrels last week to 487.3 million barrels, close to record highs, according to the Energy Information Administration, highlighting that more oil is being produced than is needed.
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“Strikes against the Islamic State could worsen the geopolitical tensions in the oil-producing Middle East region and this supports crude prices”, said Sanjeev Gupta, who heads the Asia-Pacific oil and gas practice at professional services organisation EY.
Crude fell 0.5% in NY after dipping below $40 a barrel Wednesday for the first time since August.
The profit that refiners get for turning crude into gasoline, known in market parlance as the gasoline crack CL-RB1=R , widened to more than $13.50 a barrel, the highest in 2-1/2 months.
“We have been forecasting weak commodity returns since last fall, although the extent of this weakness has far exceeded our initial expectations”, the analysts wrote. In November 2014, OPEC made a decision to maintain its oil production levels, accelerating the price decline. The December contracts expired Tuesday, so traders would be closing out positions ahead of the expiry date.
Crude demand is expected to rise by 1 million barrels a day every year in this decade, and the world requires more investments in oil to compensate for declining recovery rates, he said.
Front-month Brent futures for January climbed 14 cents at $44.32 a barrel as of 0227 GMT, following the previous session’s 4 cent gain.
Earlier in the session, weekly data from Baker Hughes showed that the number of US oil-drilling rigs fell by 10 to 564 (http://www.marketwatch.com/story/falling-rig-counts-help-boost-crude-oil-prices-2015-11-20) as of Friday.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell as much as 0.70% to an intraday low of 98.80, before moving back above 99 in USA afternoon trading.
“We’ve also hit technical oversold levels on both Brent and WTI, making the pre-weekend short-covering logical”.
Inventories at Cushing, Oklahoma, the delivery point for the U.S. contract added 1.5 million barrels to 56.85 million barrels.
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The Organization of Petroleum Countries has kept up production to pressure high-cost rivals, such as the developing USA shale oil producers. This compares to the 2 million barrel increase expected by analysists.
