The price for Brent crude oil maintains its position above $50 per barrel on lingering signs of trouble for OPEC member Nigeria and a report on declining levels of crude oil inventories in the United States. File Photo by Monika Graff/UPI | License Photo
July 26 (UPI) -- A bullish report on crude oil inventories from the United States added to planned and unplanned shortages from OPEC to give oil prices another rally Wednesday.
Saudi Arabia added support for the rally with an announcement of deeper cuts. The country is the largest oil producer among the Organization of Petroleum Exporting Countries and also the largest contributor to a collective effort to offset supply-side strains with managed declines.
Late Tuesday, the American Petroleum Institute added further support for higher prices with a report of a 10.2 million barrel decline in U.S. crude oil levels, though its report of a 1.9 million barrel increase in gasoline stocks muted the overall impact. That compares with a decline of 2.5 million barrels of crude oil and 1.25 million barrels for gasoline from a survey of analysts by S&P Global Platts this week.
Nigeria reported this week that militants hit a crude oil pipeline, sidelining about 150,000 barrels of oil per day in capacity. Nigeria is exempt for the OPEC-led effort so it can steer oil revenue toward national security efforts, but agreed to limit production once it stabilized at 1.8 million bpd. The head of the Nigerian National Petroleum Corp. said last week production already topped 2 million bpd.
The crisis evolved Wednesday, however, when the militant group Boko Haram was said to have ambushed dozens of oil workers. According to a report from Nigerian news service This Day, as many as 40 workers contracted by the NNPC may have been killed.
The price for Brent crude oil was up 0.66 percent at 9:23 a.m. EDT to $50.53 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.98 percent to $48.36 per barrel.
Official data from the U.S. Energy Information Administration on crude oil and gasoline stockpiles is released late Wednesday morning and could make or break the rally. Traders said the API data was very bullish, though the momentum would only be entrenched if crude oil prices broke through the $55 per barrel mark.
"The subsequent bout of price strength will be well-received by many but relieved bulls should be careful for what they wish for," Stephen Brennock, an analyst with London oil broker PVM, said in an emailed newsletter. "Any price rebound will only embolden U.S. shale producers at a time when rumors have started to emerge that the U.S. shale boom is slowing."
Higher levels of U.S. crude oil production, particularly last year, acted as a negative factor on crude oil prices.