Oil prices rose as US stockpiles drop from record high level

Energy - Mohit Shah - Mar 16,2017

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oil prices rose as us stockpiles drop from record high level

On Thursday, crude oil prices rose after official government data revealed US stockpiles dropped from higher levels; the first decline of 2017.

On Wednesday, crude oil prices experienced a boost after a swing of market reports as well as official data created some hope towards the decrease of the three-year global oversupply.

As per the recorded figures, US West Texas Intermediate (WTI) crude shot up by 29 cents, or 0.6 percent, trading at $49.15 a barrel by 0541 GMT. Also, Brent futures mounted 34 cents, or 0.7 percent, to reach $52.15. This was their first increase in seven days till Wednesday, achieving 1.7 percent.

On Wednesday, the International Energy Agency stated in its monthly oil report, global oil inventories surged for the first time in January after a gap of six months; this happened despite the OPEC agreement.

However, data obtained from the US Energy Information Administration (EIA) revealed that US stockpiles dropped last week. It was the first weekly decline after a continuous increase for nine straight weeks.

At present, a strong look at the inventories is maintained by the oil traders so as to check whether the OPEC reduction is trimming the global glut or not.

In the week to March 10, crude inventories fell 237,000 barrels, opposing the forecast by analysts' which focused on a rise of 3.7 million barrels.

Bernstein Energy said in a note on Thursday, “While the large (global) inventory build seems counter-intuitive given the cuts to OPEC supply, there are good reasons for this”, highlighting seasonal declines in demand, traders tapping floating storage along with time gaps between cuts and deliveries.

It is believed the market has been overwhelmed with OPEC's level of compliance in terms of the cuts and these are expected to hold, as per BMI Research.