Crude oil is trading at 97.22 skyrocketing as expectations that US inventories have dropped. This morning in the Asian session crude oil added $1.18 pushing well above its recent trading range and also above the expected trading range. Brent oil responded the same adding 28 cents to trade at 112.87 with the spread narrowing $15.00. Brent crude climbed towards $113 a barrel this morning, while the U.S. benchmark rose more than $1 to a five-week high after news of the scheduled start of a key pipeline helping to relieve a supply bottleneck at the country’s main oil storage hub. U.S. oil built on a more than $2 jump in the previous session, after TransCanada said it would begin operations at its Keystone XL pipeline on Jan. 3. The launch will allow rising inventories at the Cushing, Oklahoma oil hub to move to the U.S. Gulf Coast, where a large share of the country’s refining capacity is concentrated.
U.S. crude, also known as West Texas Intermediate or WTI, has lost value relative to Brent due to infrastructure constraints amid rising shale oil production, causing a supply glut in Cushing, where the country’s main oil contract Nymex is priced. Brent’s premium to U.S. crude narrowed by almost a $1 to $15.63 from Tuesday’s close of $16.58. Supply concerns in the Middle East and Africa combined with a glut in the U.S. had in recent months prompted investors to make bullish bets on the spread, which stood at more than $19 last week, up from $2.64 on Sep. 18.
The U.S. benchmark was also supported by data from the American Petroleum Institute that showed a drop of 12.4 million barrels in domestic inventories and snapped a 10-week streak of builds that had added nearly 36 million barrels. The more closely-watched report from the Energy Information Administration is due this afternoon.
Yesterday, by early afternoon in Europe US crude for January delivery was up US10 cents to U$93.92 a barrel on the New York Mercantile Exchange. The contract added US$1.10 to close at US$93.82 on Monday. Oil prices were buoyed by fresh data pointing to steady manufacturing growth in the US and China.US manufacturing grew in November at the fastest pace in 2 1/2 years as factories ramped up production, stepped up hiring and received orders at a healthy clip. Manufacturing activity has now expanded for six straight months after hitting a rough patch in the spring, suggesting that growth was solid in the October-December quarter.
Chinese manufacturing also continued to grow slightly last month, two surveys showed, in evidence that a recovery in the world’s Number 2 economy was continuing, albeit at a modest pace.
Investors are looking to a meeting of the Organization of Petroleum Exporting Countries (OPEC) in Vienna on Wednesday for an update on production levels. OPEC is expected to keep intact its daily output target of 30 million barrels a day, although the group may come under pressure to reduce production if some supply sources suffering disruptions return to normal.
Heating oil is trading in the green adding 56 points to trade at 3.0713 while natural gas edges closer to the $4 price level trading at 3.989 up by 14 points ahead of tomorrow’s EIA inventory. Cold weather continues across the US as weather forecasts continue to call for colder temperatures than expected pushing residential demand higher than previous expected.