Oil Price Hits High Level Amid China Growth, US Stockpiles
Oil prices slipped on Wednesday after Brent crude earlier hit 2019 high above US$72 a barrel. Photo by In-Cyprus.

JAKARTA (TheInsiderStories)Oil prices slipped on Wednesday after Brent crude earlier hit 2019 high above US$72 a barrel, supported by steady economic growth in China and data showing United States (US) crude stockpiles shrank last week.

US West Texas Intermediate crude futures settled 29 cents lower at $63.76 per barrel, down half a percent but not far from last week’s 2019 closing high at $64.61.

Meanwhile, International benchmark Brent crude oil fell 10 cents to $71.62 a barrel, after earlier touching $72.27, the highest since Nov. 8.

US crude inventories fell by 1.4 million barrels in the last week, compared with analysts’ expectations for an increase of 1.7 million barrels. However, the official data from the Energy Information Administration on Wednesday was about half the decline reported by the American Petroleum Institute on Tuesday.

Crude remained supported by steady economic growth in China. China’s economy grew by 6.4 percent in the first quarter, official data showed, defying expectations for a further slowdown and assuaging global markets as a US-China trade deal also appears near.

Refinery throughput in China — the world’s second-largest crude user — rose 3.2 percent in March from a year earlier. The demand side of the equation got a substantial fillip suggesting prices will continue to move higher on improving global growth and risk sentiment.

Prices have been supported this year by a pact reached by the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to limit their oil output by 1.2 million barrels per day.

Global supply has been tightened further by US sanctions on OPEC members Venezuela and Iran. Iran’s crude exports have dropped in April to their lowest daily level this year, tanker data showed and industry sources said, suggesting a draw down in buyer interest ahead of expected further pressure from Washington.

In June, OPEC and its partners will decide whether to continue to curb their production, although concerns have arisen over Russia’s willingness to stick with the cuts.

Gazprom Neft, the oil arm of Russian gas company Gazprom, expected the global oil deal between OPEC and its allies to end in the first half of the year, a company official said on Tuesday. As the possibility of Russia ending the OPEC deal remains, that is capping further gains.

Previously, US crude oil inventories fell last week, breaking a stretch of three consecutive builds, but less-than-expected declines in gasoline and distillate stockpiles took the wind out of earlier gains.

The EIA said in its regular weekly report that crude oil inventories declined by 1.4 million barrels in the week to April 12. That was compared to forecasts for a stockpile draw of 1.2 million barrels, after a gain of 7.03 million barrels in the previous week.

The EIA report also showed that gasoline inventories declined by 1.17 million barrels, compared to expectations for a draw of 2.13 million barrels, although distillate stockpiles dropped by just 0.36 million barrels, compared to forecasts for a decline of 0.85 million.

The lower-than-expected declines, which point to easing crude demand, appeared to hold sway over markets as U.S. crude prices turned negative following the release, last down 6 cents at $63.99 a barrel, compared to $64.18 prior to the publication.

London-traded Brent crude futures were unchanged at $71.72 a barrel, compared to $71.78 ahead of the report. Prior to the publication, crude prices had supported by positive economic data out of China. Beijing reported 6.4 percent growth for the first quarter, beating expectations for a slowdown to 6.3 percent. Other data released overnight also showed larger-than-forecast increases in industrial production and retail sales for March.

The positive data from the world’s largest oil importer eased concerns over the negative impact on demand from an economic slowdown.

Despite the positive data, worries over the future of OPEC-led production cuts have limited gains this week. Reportedly, Russia’s finance minister suggested on Monday that oil producers may wish to increase output when the agreement ends in June in order to recapture market share from the US that has been producing at record highs.

Alexander Novak, Russia’s energy minister, said on Wednesday that it was too early to discuss possible options with regard to its agreement with OPEC. Novak emphasized that a decision would be made at the summit in June.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com