Oil prices up 1% on big storage withdrawal, delay in Opec+ production hike

US crude oil inventories fell more than expected last week

By Reuters

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An oil pump operating in the Permian Basin near Midland, Texas. — Reuters file

Published: Thu 5 Sep 2024, 8:29 PM

Oil prices edged up about 1 per cent on Thursday on a bigger-than-expected withdrawal from US inventories and a delay to output increases by OPEC+ producers after futures fell to multi-month lows in the prior session on Chinese demand concerns.

Brent futures rose 89 cents, or 1.2 per cent, to $73.59 a barrel by 11:19am EDT (1519 GMT), while US West Texas Intermediate (WTI) crude rose 94 cents, or 1.4 per cent, to $70.14.

On Wednesday, Brent settled at its lowest since June 2023 and WTI closed at its lowest since December 2023.

The US Energy Information Administration said energy firms pulled 6.9 million barrels of crude out of storage during the week ended Aug. 30.

That was much bigger than the 1 million barrel draw analysts forecast in a Reuters poll, but was in line with the 7.4 million barrel draw reported by the American Petroleum Institute industry group on Wednesday.

There was a withdrawal of 6.3 million barrels during the same week last year, and also compares with an average decrease of 3.8 million barrels over the past five years (2019-2023).

Further support came from discussions between the Organization of the Petroleum Exporting Countries and allies led by Russia, known collectively as OPEC+, about delaying output increases due to start in October.

OPEC+ has agreed to delay a planned oil output increase for October and November after crude prices hit their lowest in nine months, three sources from the producers’ group told Reuters on Thursday.

Analysts at US investment banking firm Jefferies said the OPEC+ decision has the effect of tightening fourth quarter balances by about 100,000-200,000 barrels per day and should be sufficient to prevent material builds even if China demand does not improve.

The original OPEC+ plan in June would have entailed 180,000 barrels per day monthly increases in production from October until December, and roughly 210,000 barrels per day monthly increases from January to September 2025, Jefferies said.

However, continued soft demand in China and the potential end of a dispute halting Libyan oil exports has pushed the group to reconsider.

Financial markets were also awaiting further US macroeconomic indicators due later on Thursday and Friday, including jobs data.