Markets are in a state of limbo as traders wait for new data on U.S. crude oil inventories in a broader energy market strained by the pending impact of a severe winter storm. File photo by Brian Kersey/UPI |
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Jan. 4 (UPI) -- Mixed data on U.S. crude oil inventories, geopolitical issues and bad weather in the world's leading economy left oil prices in mixed territory Thursday.
Though oil production hasn't been impacted, the political unrest simmering in Iran could trigger a broader reaction in the region. For Washington, the demonstrations could prompt U.S. President Donald Trump to decide not to issue a sanctions waiver for Iran next week, which could restrict a million barrels of Iranian oil now on the market.
The potential for a shortage sparked by geopolitical issues comes as traders watch for a shrinking gap between supply and demand. The Organization of Petroleum Exporting Countries, of which Iran is a member, is working to balance the market through coordinated production cuts now in their second year.
Late Wednesday, the American Petroleum Institute reported U.S. crude oil inventories dropped almost 5 million barrels. That's less than the 5.7 million draw expected from analysts surveyed earlier in the week by commodity pricing group S&P Global Platts.
Formal U.S. data is published late Thursday morning by the U.S. Energy Information Administration, leaving markets in a bit of a state of limbo early on. The price for Brent crude oil, the global benchmark, was up just 0.12 percent at 9:17 a.m EST to $67.92 per barrel. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.28 percent to $61.80 per barrel.
The spread, or difference, between Brent and WTI was wide enough in 2017 to encourage more U.S. oil exports, though that gap has narrowed so far this year.
Shale oil from inland U.S. basins was seen as a threat to OPEC's effort to balance the market. Phil Flynn, the senior market analyst for the PRICE Futures Group in Chicago, said in emailed commentary that shale might not be all it's cracked up to be.
"U.S. shale producers are not rising to the occasion," he said. "At least not in the United States, where refiners still covet that heavy crude [from outside the country]."
Flynn said the lighter blends from shale help, but aren't able to replace the heavier grades of oil that domestic refiners prefer.
The broader fuel and electricity market in the United States in general may be tested by a severe winter storm pummeling the Atlantic coast. Boston is expecting as much as 17 inches of snow on Thursday, and demand is already strained.
On Monday, the U.S. total demand for natural gas was the highest level in more than a decade, while total natural gas production dropped 6 percent from this time last year. National Grid, the investor-owned utility covering Massachusetts, New York and Rhode Island, meanwhile, added that it's expecting "extensive damage" from the storm.
In the broader U.S. economy, the U.S. Labor Department reported first-time claims for unemployment for the week ending Dec. 30 increased 3,000 from the previous week's revised level, which was adjusted up by 2,000. The four-week moving average, a less-volatile metric, increased 3,500 from the previous week.
