Brent crude edges up as inventories in US drop

July 5, 2018

Brent crude oil edged up on Wednesday after a second successive drop in US crude inventories driven by an outage at the Syncrude Canada oil sands facility, which usually supplies US. Brent crude futures were up 7 cents at $77.83 a barrel by 0915 GMT, while US crude futures were down 17 cents at $73.97 a barrel.
US crude inventories fell by 4.5 million barrels to 416.9 million barrels in the week to June 29, the American Petroleum Institute (API) said. Gasoline and distillate stocks, also fell, the API said.
The decline in fuel inventories was largely down to the outage at Syncrude Canada’s 360,000 barrels per day (bpd) oil sands facility near Fort McMurray, Alberta.
The outage is expected to last through July. Looming US sanctions on Iranian crude exports, force majeure in Libya and unplanned pipeline outages in Nigeria are meeting rising output by the Organization of the Petroleum Exporting Countries and clouding the supply outlook generally.
“In an ideal world an increase in global or regional oil production would have downward pressure on prices. These are, however, no normal times as supply outages are almost weekly occurrences.
Under these circumstances it is justified to argue for higher prices when production increases are announced,” PVM Oil Associates strategist Tamas Varga said.
Trading activity is expected to be limited on Wednesday by the US Independence Day holiday but volatility however is creeping higher.
Implied options volatility, a way of measuring uncertainty among crude oil traders and investors is at its highest since the run-up to last month’s Opec meeting.
Harry Tchilinguirian, head of commodities strategy at BNP Paribas, said when an investor does not have a strong view on which way the price of crude oil futures might move, they tend to take a bet on options instead, to protect themselves.