Crude settles in black after large US draw

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(S&P Global) Crude futures settled higher Friday after the US Energy Information Administration reported a large draw in US crude oil inventories.

An uptick in refinery demand weighed on US crude oil inventories last week, extending their decline for a second straight week, EIA data showed Friday.

Commercial crude inventories fell 5.47 million barrels to 441.36 million barrels during the week ended December 20, EIA data showed. The draw-down left stocks 1.9% above the five-year average for this time of the year, the narrowest supply overhang since late October.

Crude stocks slid at Cushing, Oklahoma — the delivery point of the NYMEX crude contract — for a seventh straight week, dropping 2.39 million barrels to a 13-month low 37.77 million barrels.

A 2.7 percentage-point uptick in refinery utilization rates to 93.3% of capacity contributed to the crude draw. Refiner net crude inputs were up 418,000 b/d at 16.98 million b/d, moving them nearly 1% above the five-year average for this time of the year.

The EIA inventory report was delayed to Friday due to the Christmas holiday.

The front-month Brent WTI spread — an approximation of US crude competitiveness abroad — opened to $6.44/b Friday, a fresh three-week high. Despite this widening trend, US crude exports slipped 236,000 b/d to 3.39 million b/d last week.

The US crude draw lifted oil futures, which were trending lower ahead of the EIA data release on bearish indications from Russian energy minister Alexander Novak regarding the longevity of the OPEC+ producer cut agreement. Novak said the group might consider ending oil output cuts in 2020 in order to preserve market share and implement projects that are likely to limit price gains.

Production cuts are “not an indefinite process and we will need to gradually make a decision to exit in order to maintain market share and so that our companies can fund and implement their promising projects,” Novak told the Rossiya 24 channel in an interview, when asked about the prospects for the OPEC+ deal in the coming year.

For the first three months of 2020, OPEC, Russia and their nine other allies agreed to deepen output cuts by 503,000 b/d to 1.7 million b/d.

Refined product futures edged lower amid a pullback in demand last week.

NYMEX January RBOB settled down 25 points at $2.0496/gal and January RBOB was 64 points lower at $1.7473/gal at market settle.

Total product supplied — a proxy for demand — pulled back 486,000 b/d on the week but was still nearly 4% above the five-year average at 21.31 million b/d.