Oil Gains on Geopolitics, Rising U.S. Equities
May 15 2019 - 12:47PM
Dow Jones News
By Dan Molinski
-- Oil prices rose Wednesday as geopolitical tensions and rising
stock prices on Wall Street offset bearish data showing U.S. oil
inventories are at a 20-month high.
-- West Texas Intermediate futures, the U.S. oil benchmark, were
0.7% higher at $62.23 a barrel on the New York Mercantile
Exchange.
-- Brent crude, the global oil benchmark, was 0.8% higher at
$71.79 a barrel on London's Intercontinental Exchange.
HIGHLIGHTS
Geopolitics: Oil investors continued to add risk-premium to
crude prices Wednesday amid possible global supply disruptions as
confrontations intensify between Iran and the U.S. and its
allies.
"Plenty of risk and questions remain surrounding attacks on oil
infrastructure connected to the Hormuz Strait. Following sabotage
efforts against Saudi and UAE tankers in the region, a drone attack
against a critical Saudi pipeline raises speculation of a more
coordinated and particularly oil-focused operation," said Robbie
Fraser, global commodity analyst at Schneider Electric in
Louisville. "The damaged pipeline in question is a key link in
mitigating some of Saudi's high reliance on the Hormuz Strait to
export crude; an issue that has been in heavy focus following
recent threats from Iran."
Still, analysts also noted the reported attacks and rising
rhetoric don't appear to be causing any actual supply problems,
yet. "To see price supported, we need to see supply disruption and
we haven't seen that even after yesterday's attacks," said Giovanni
Staunovo, a commodity analyst at UBS Wealth Management. That said,
"most of the oil market's spare capacity sits in the region, so
some risk will probably be priced in."
Inventories: Oil markets saw very little selling pressure
Wednesday despite a weekly report from the Energy Information
Administration showing U.S. commercial inventories of crude oil
rose by 5.4 million barrels to 472 million barrels, the highest
since September 2017. Total U.S. stockpiles of crude oil and fuels
also rose sharply, to a 19-month high of 1.27 billion barrels, but
U.S. oil production fell by 100,000 barrels a day to 12.1 million
barrels a day.
Dominick Chirichella, director of market insights at DTN, said
investors may have shrugged off the inventory data given
geopolitical tensions and some easing of worries over U.S.-China
trade negotations.
"From a macro perspective, the EIA report was obviously
bearish," Mr. Chirichella said. "But there's a lot happening right
now geopolitically, and equities seem to be recovering some after
the negative reaction earlier in the week to U.S.-China trade
talks."
INSIGHT
Global Supply: Oil markets also focused Wednesday on the
International Energy Agency, which said global oil supply dropped
in April as falling production from sanction-hit Iran and dwindling
supply in non-OPEC nations buoyed crude prices to a five-month
high. In its closely watched monthly oil-market report, the IEA
said the world's total oil supply fell by 300,000 barrels a day
month-on-month to 99.3 million barrels a day. That's roughly 3
million barrels a day below November 2018 highs, but an on-year
rise of 775,000 barrels a day, the agency said.
AHEAD
-- Baker Hughes is due to release its weekly rig-count report on
Friday at 1 p.m. ET.
--David Hodari contributed to this article.
Write to Dan Molinski at Dan.Molinski@wsj.com
(END) Dow Jones Newswires
May 15, 2019 12:32 ET (16:32 GMT)
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