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Oil Rises After U.S. Crude Output Gain Shrinks, Dollar Slips


Wiljor
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Oil rose to a two-week high in New York as the shrinking size of U.S. crude production gains and a falling dollar outweighed rising supply.

U.S. crude production rose 3,000 barrels a day to 9.42 million in the seven days ended March 20, the Energy Information Administration said. The smallest increase since January left output at the highest level in more than three decades. Prices retreated initially as the report showed that crude supplies increased 8.17 million barrels to 466.7 million last week, the most in records compiled since August 1982.

U.S. oil explorers sidelined 41 drilling rigs last week, the smallest drop in three weeks and down from the average 59-rig weekly decline in February, according to data from Baker Hughes Inc. The dollar dropped for the sixth time in eight days against the euro, bolstering raw materials denominated in the U.S. currency.

“Output was up just 3,000 barrels a day, which seems to have caught the attention of the market,” Kyle Cooper, director of commodities research at IAF Advisors in Houston, said by phone. “Production might level off or even decline a bit but remain at a very high level. The fundamentals still look really bad and I think we’ll resume the move lower.”

West Texas Intermediate oil for May delivery rose $1.26, or 2.7 percent, to $48.77 a barrel at 1:27 p.m. on the New York Mercantile Exchange. The volume of all futures traded was 18 percent below the 100-day average for the time of day.

Brent Movement

Brent for May settlement climbed $1.32, or 2.4 percent, to $56.43 a barrel on the London-based ICE Futures Europe exchange. Volume was down 15 percent from the 100-day average. The North Sea oil traded at a $7.54 premium to WTI.

Nationwide crude supplies were projected to climb 4.75 million barrels last week, according to the median of eight analyst estimates in a Bloomberg survey.

“The crude oil inventory build was off the charts again,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “The unrelenting supply fundamentals are going to continue to weigh on the market.”

The combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies from shale formations in the central U.S.

Cushing Stockpiles

Inventories at Cushing, Oklahoma, the delivery point for WTI traded in New York, climbed 1.91 million barrels to a record 56.3 million in the week ended March 20, according to the EIA.

“There’s anywhere between 65 and 75 million barrels of capacity at Cushing depending on who you ask,” Cooper said. “At this rate we will be at capacity in a few weeks,”

Refineries operated at 89 percent of their capacity, up from 88.1 percent the prior week, the report showed. U.S. refiners schedule maintenance for late winter as they transition from winter fuels to maximizing gasoline output.

Supplies of gasoline fell 2.01 million barrels to 233.4 million. Inventories of distillate fuel, a category including diesel and heating oil, declined 34,000 barrels to 125.8 million.

Gasoline futures for April delivery rose 2.33 cents, or 1.3 percent, to $1.823 a gallon. April ultra low sulfur diesel added 0.5 percent to $1.7141.

The U.S. average retail price of regular gasoline rose 0.2 cent to $2.421 a gallon Tuesday, according to AAA, the nation’s biggest motoring group.

The Organization of Petroleum Exporting Countries, which resisted calls to reduce production at a November meeting, will probably maintain its collective quota when it next meets in June, according to Facts Global Energy, a research company.

Projected Decline

Oil prices will continue to fall in the second quarter as refineries shut for maintenance, FGE said. Demand will slow and send Brent as low as $35 a barrel, Fereidun Fesharaki, the chairman of FGE, told a conference Tuesday in Fujairah, United Arab Emirates.

Progress has been made in negotiations between Iran and world powers over the Islamic republic’s nuclear program while an accord is unlikely to be reached this week, a senior European official who asked not to be identified said in Brussels. The six nations -- the U.S., U.K, France, Germany, China and Russia -- have a self-imposed March 31 deadline to reach a framework agreement with Iran about its nuclear program.

Iran may increase oil exports within months of a deal, according to U.S. and European officials. The country exports 1 million to 1.1 million barrels of crude per day, down from 2.5 million before U.S. and European Union sanctions went into effect in mid-2012.

http://www.bloomberg.com/news/articles/2015-03-24/oil-holds-near-48-as-u-s-crude-supplies-seen-expanding-glut

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