Oil prices steadied Wednesday after a four day rally that took the cost of a barrel of West Texas Intermediate, the U.S. benchmark, to its highest level since July.
Two releases from the U.S Energy Information Agency (EIA) were the source of the price action. Initially, a monthly report on global oil demand projected that it would increase at the fastest rate in six years in 2016, suggesting that the oil glut created by American shale production and Saudi Arabia's attempt to maintain market share, may dissipate as crude demand rises.
But the optimistic demand forecast which brought the generic price to WTI to $49.71, its highest since July 22nd, was tempered by another report from EIA that specified a second weekly increase in U.S crude oil stocks.
Crude oil inventories in U.S. storage rose 3.073 million barrels last week, well ahead of the forecast for a 2.2 million barrel increase and not far from the prior week’s run-up of 3.955 million barrels. Generic WTI fell as low as $47.83 before stabilizing near $48.50.
Also pressuring the price was a 0.84 percent gain U.S crude production in the week of October 2nd, the largest rise in five months led by a 0.7 percent increase from non-Alaskan fields.
American production peaked at 9.610 million barrels a day in June and has dropped only 4.6 percent since even though oil prices have more than halved since early last summer and are down 21 percent since June alone.
American shale producers have proved much more resilient to price declines than had been anticipated, maintaining production with a combination of technological improvements and cost cutting measures.
Chief Market Strategist
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