Oil Prices Rise Ahead of U.S. Stockpile Data

By Alison Sider and Christopher Alessi Features Dow Jones Newswires

Oil prices rose Tuesday as traders and investors anticipated that U.S. data will show that a glut of oil is continuing to shrink.

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U.S. crude for August delivery settled up 64 cents, or 1.44%, at $45.04 a barrel. Brent, the global benchmark, rose 64 cents, or 1.37%, to $47.52 a barrel.

Market participants are expecting that the U.S. Energy Information Administration will report a drop in U.S. stockpiles in its weekly report, due Wednesday morning.

The weekly data has become an important barometer as investors and traders watch to see whether output reductions by the Organization of the Petroleum Exporting Countries and other major producers are helping to bring down global oil inventories.

"You continue to see draws in the U.S., ratcheting up expectations that maybe the cuts are having an effect," said Gene McGillian, research manager at Tradition Energy. "People don't want to be too exposed below the lower-$40 mark."

Analysts surveyed by The Wall Street Journal are expecting the data to show that U.S. oil stockpiles fell by 3.2 million barrels last week.

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The American Petroleum Institute, an industry group, said late Tuesday that its own data for the week showed an 8.1-million-barrel decrease in crude supplies, an 801,000-barrel decline in gasoline stocks and a 2.1-million-barrel increase in distillate inventories, according to a market participant.

Oil prices edged lower in earlier trading Tuesday on reports that Saudi Arabia pumped more oil in June, exceeding the output cap it agreed to for the first time since OPEC's cuts went into effect. A person familiar with the matter said Saudi Arabia produced 10.7 million barrels a day last month, about 12,000 barrels a day more than it promised agreements struck with OPEC and other big producers like Russia late last year.

But prices quickly began to move higher again, settling up for the second day in a row.

"We're approaching the time frame on the calendar that is a very traditional bull market. I think the market's trying to come up with some excuse to start that cycle again," said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. "Drillers are drilling, producers are producing -- it's coming at us in a wash, but in the short term nobody is panicking as they were."

Talk of production cuts in Libya and Nigeria have helped boost prices this week. Both are members of OPEC but exempt from the group-led agreement to cut global output by 2%. The exemption was meant to allow their production to rebound following years of fighting between the countries' governments and local insurgents, which blunted output. In recent months, production in those countries has risen strongly, offsetting some one-third of the cuts made so far this year by the cartel and its allies.

The output-cap exemptions for Libya and Nigeria have drawn ire from some fellow producers. The issue is expected to be discussed when OPEC's monitoring panel meets July 24 in Moscow.

Rising output from the U.S. has also undermined OPEC's efforts to work down the supply glut, but low prices may slow some drillers down. On Tuesday, the U.S. EIA trimmed its forecast for U.S. output next year: it now expects U.S. production to average 9.9 million barrels a day in 2018. That is still a record high level, but down slightly from its previous forecast that output would average 10 million barrels a day next year.

"A lower forecast for crude oil prices is expected to shave a little off projected growth in U.S. oil production next year," acting EIA Administrator Howard Gruenspecht said in a statement.

Gasoline futures rose 1.76 cents, or 1.17% to $1.5183 a gallon on the New York Mercantile Exchange. Diesel futures rose 2.27 cents, or 1.56%, to $1.4763 a gallon.

Summer Said and Jenny W. Hsu contributed to this article.

Write to Alison Sider at alison.sider@wsj.com and Christopher Alessi at christopher.alessi@wsj.com

(END) Dow Jones Newswires

July 11, 2017 17:11 ET (21:11 GMT)