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Oil prices rises after API reports surprise stocks drop

By Renzo Pipoli
Crude oil prices rose early Wednesday after a surprise drop in stocks reported by the American Petroleum Institute Tuesday. File Photo by Brian Kersey/UPI
Crude oil prices rose early Wednesday after a surprise drop in stocks reported by the American Petroleum Institute Tuesday. File Photo by Brian Kersey/UPI | License Photo

Feb. 27 (UPI) -- Oil prices rose Wednesday morning after the American Petroleum Institute reported a surprise drop in crude stocks in its latest weekly report. Traders are also awaiting official Energy Information Administration data later today.

West Texas Intermediate future prices rose 2.4 percent to $56.82 per barrel as of 8:14 a.m. EST, with Brent crude prices rising 1.5 percent to $66.33 per barrel.

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WTI prices were nearly flat Tuesday after a drop at the start of the week. WTI futures reached their highest level so far this year on Friday, when they closed at $57.26 per barrel.

"Crude oil trades higher after the API yesterday supported a surprise drop in U.S. crude stocks. Adding to the support has been comments from the Minister of Energy of Saudi Arabia that the current production cut deal could be extended," Ole Hansen, head of commodity strategy at Saxo Bank, told UPI.

"By making this comment the minister is playing it safe. This in order to make sure that the market refrain from selling oil before the price supportive tightness become visible in the data," he added.

OPEC, led by Saudi Arabia, agreed on Dec. 7 to cut crude oil output starting Jan. 1 by 800,000 barrels per day, with some non-OPEC nations, led by Russia, agreeing to match the cut with another 400,000 barrels per day of their own. The move has contributed to a recovery of prices since hitting lows in late December, when WTI traded under $43 per barrel.

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The Energy Information Administration will publish official oil inventory official data later Wednesday.

Another factor that contributed to crude oil price increases in recent weeks was concern about political instability in Venezuela, a country that produces about 1.1 million barrels per day. The market has also weighed the impact of United States sanctions against Venezuelan oil.

"So far global oil demand remains robust despite data pointing to a global economic slowdown," he added.

Another uncertainty regarding supply is the possibility that the United States may not renew waivers to buyers of Iranian oil despite nuclear-related sanctions announced in May. The November waivers will expire in March.

Traders have also had concerns about crude oil demand, in a context where an economic slowdown may be looming, in part due to a trade war between the world's two biggest economies, the United States and China.

"A slowdown which negatively impacts demand growth could be the trigger that requires an extension of the current (OPEC) deal," Hansen said.

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