US crude oil inventories last week dropped the most in ten months, falling more than expected as imports declined and refining rates rose, while gasoline stocks decreased and distillate inventories rose, the Energy Information Administration said on Wednesday.
Oil prices were just continuing the positivity from yesterday's session which was up by 1.4%.This is because of the industry group American Petroleum Institute showed data that the oil production was really cut down; it was at 8.1 million contractions in the U.S. crude supplies last week. The lower 2018 forecast of 9.9 million barrels per day will ease concerns that the OPEC-led supply cut will lead to a flood of competing USA shale supplies, swamping the OPEC effort. Both countries were exempted from the production cuts.
"There is strong demand for our crude but we are sticking to our Opec commitments", the source, who is familiar with the kingdom's oil policy, said on Wednesday.
The EIA Short-term Energy Outlook Highlights Gasoline/Refined Products: "The price USA consumers are expected to pay for gasoline this summer has been revised down as lower crude oil costs provide a break at the pump". US crude gained 93 cents to $45.97.
Goldman Sachs analysts said in a July 10 report that oil prices could dip below $40 per barrel (bbl) as the "market tests OPEC's and shale's reaction".
Before the EIA report, benchmark West Texas Intermediate (WTI) crude for August delivery traded up about 2.5% at around $46.15 a barrel, and it slipped to around $46.10 (up 2.4%) shortly after the report's release.
That was much more than the 2.9 million-barrel crude draw forecast in a Reuters poll but was slightly less than the 8.1 million-barrel decline reported by the American Petroleum Institute (API) on Tuesday. This fate looks shaky as US shale producers are already pulling back and reports of investment capital for shale is drying up.
The U.S. Commerce Department in its last estimate, published June 29, said first quarter growth in gross domestic product was 1.4 percent, an increase from the previous estimate of 1.2 percent. The commodity is looking to be extending the positive gains until the end of the week because of the growing cut in the fuel inventories and the United States government's adjusted forecasts for crude output for next year.
The US production stands at 9.34 million barrels per day.
Oil has traded below $50 a barrel since May amid concern that rising global supplies will offset curbs by the Organization of Petroleum Exporting Countries and its partners including Russian Federation.
The Energy Information Administration (EIA) has cut the 2018 U.S. oil output forecast by 1 per cent to 9.9 mln bbls/day.
But on Tuesday, EIA cut its 2018 US crude output forecast by 1% to 9.90 million BPD.
Oil supply, the EIA said, is poised to drop before the demand for oil starts to wane, meaning there is a period of high oil prices up ahead.