Crude Oil Prices Rally to Three-Year High on Weak US Crude Draw

Crude oil prices rallied further on Thursday after hitting a three-year during the previous trading session due to reports of a surprising decline in the weekly production in U.S. crude supplies in the middle of the efforts of the Organization of the Petroleum Exporting Countries and other non-OPEC participating countries in the production cuts to help curb oversupply as well as help drive oil prices up.

Weekly Decline in U.S. Crude

Despite an increase of 1.8 million barrels in U.S. crude production according to a report from the American Petroleum Institute earlier this month, oil prices were seen trading higher for the past couple of trading sessions.

At the beginning of the month, oil prices rallied on reports of a slightly weaker draw in U.S. crude before it lost ground due to tensions in the Middle East that offset the previous decline in U.S. inventories. 

On Tuesday, the API announced a draw of 1 million barrels in the U.S. crude oil inventory sending oil prices to trade higher during the past two trading sessions in a row. Oil prices have been pressured over the past couple of months due to a continuous buildup in U.S. crude inventories and has dampened the efforts of the OPEC to help oil prices recover to normal levels.

American production have exceeded 10 million barrels per day about two weeks ago leading to the country becoming the second biggest producer in the world.However, the recent 1-million barrel decline in their crude oil inventories have pushed the Brent crude to trade above $70 per barrel during the recent trading session. The U.S. Energy Information Administration also posted a decline of 3 million barrels in the gasoline stockpiles over the last week.

Oil Prices Above $70

Brent crude futures were seen trading above the $70 per barrel level to trade 37 cents higher from Wednesday’s rally to trade at $73.85 per barrel recording a 2.7% gain from the previous trading session. U.S. crude futures on the other hand traded $68.73 per barrel which is 26 cents higher from the previous trading session.

Oil prices started trading above $60 since the beginning of the year mostly due to the the OPEC’s extension of its production cuts until the end of the year. The market’s optimism which were dampened by the recent rise in U.S. crude have been renewed following previous statements from Saudi Arabia regarding their intention to extend the oil cuts beyond the end of 2018.

In Asia, oil prices also surged with Crude Oil WTI futures for May delivery traded at $68.73 per barrel which is 0.38% higher while the Shanghai Crude Oil WTI Futures for September delivery surged 3.36% to around $70.02 per barrel. Brent Oil Futures for June delivery in London traded 0.41% higher to $73.78 per barrel. 

See also: Higher Crude Oil Prices Seen on Low US Output

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