Published: Fri, September 15, 2017
Money | By Oscar Reynolds

Oil hits $50 as it nears the August high. A few questions

Oil hits $50 as it nears the August high. A few questions

After a long time, commodity prices are on the rise.

Markets will be influenced later in the day when the U.S. Energy Information Administration releases its short-term market report, which includes forecasts for crude oil prices. "We expect crude prices to be stuck in somewhat of a holding pattern until we have Gulf Coast refineries brought back to full capacity".

USA gasoline stocks slumped by 8.4 million barrels, the largest weekly decline since the data was first recorded in 1990.

The agency, which coordinates the energy policies of industrial nations, raised its 2017 global oil demand growth estimate to 1.6 million barrels per day from 1.5 million bpd. But data show that in the first eight months of the year Iran's production averaged 3.79 million barrels daily.

The global surplus of crude and stocks over the five-year average fell to 190 million barrels.

USA crude was up $1.04, or 2.2 percent, to $49.27 per barrel and Brent crude was up 84 cents to $55.11 a barrel by 2:04 p.m. ET (1804 GMT).

Harvey, which first trampled communities in South Texas at landfall August 25 and then flooded the Greater Houston area as it stalled on the Gulf Coast, caused substantial electricity outages, as power plants and transmission infrastructure were affected by high winds and significant flooding, the Energy Information Administration (EIA) noted Wednesday. This weekly drop in inventories was smaller than the drop that occurred following a previous outage of the Colonial Pipeline in September 2016, when Lower Atlantic gasoline inventories fell by almost 6 million barrels.

"On the one hand, the smaller-than-anticipated crude [supply] build, coupled with large draws to product stocks should provide support to crude prices, but continued weakness in refinery demand and rebounding production could serve to overshadow this signal", Troy Vincent, oil analyst at ClipperData, told MarketWatch.

US gasoline futures RBc1 dipped after the data, and were down 0.8 percent at $1.6429 a gallon.

This week's gains have come despite data showing a big build in US crude inventories after Hurricane Harvey.

After being hurt by Hurricane Harvey, positive sentiments have started building up in the oil space with a wave of positive news. It said the United States should strengthen its energy security to address hurricanes, by steps such as adding oil products to government-held inventories.

On Tuesday, OPEC, in its monthly report, also pointed to a decline in its production in August as a sign that supply and demand could be moving further toward balance.

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