Oil rallies on expectation inventories will drop

Here are the latest oil production numbers from the EIA. All data is in thousand barrels per day unless otherwise noted

Here are the latest oil production numbers from the EIA. All data is in thousand barrels per day unless otherwise noted

Traders said prices rallied when industry information provider Genscape reported that crude inventories at Cushing, Oklahoma, delivery hub for USA crude, dropped 1.1 million barrels since Friday, July 27. "Yet, we remain much more concerned about the ongoing USA sanctions on Iran", analysts at Bank of America Merrill Lynch said in a research note published last week.

U.S. West Texas Intermediate (WTI) crude futures were at $68.70 per barrel at 0847 GMT, down 26 cents from their last settlement. The American Petroleum Institute (API) recently noted that crude oil barrel counts in the USA are back on the rise, expanding last week by over 5 million barrels, erasing several weeks of expectations for steady declines in reserve supplies.

On Friday, Brent crude traded around 0.1 percent lower at $73.44.

The weekly estimates for May all point to more than 10.7 million bpd of crude oil production, but the more accurate-albeit lagged-data, based on survey of producers, shows that US oil output had trailed projections by around 300,000 bpd.

Oil prices declined toward lows not seen since late June yesterday after official data showed an unexpected increase in the United States (U.S.) inventories of crude oil that pushed stockpiles back toward the five-year average.

Output by top exporter Saudi Arabia has also risen recently, to about 11-million bpd, and USA production is around that level as well.

Even with last week's rise, overall USA crude inventories are below the 5-year average of around 420 million barrels.

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"Oil is holding up reasonably well. A lot of this is the risk premium priced in for Iran and when do we start seeing an impact on supply there", Patterson said.

Oil prices are feeling the effects of ongoing tensions over global trade, with markets concerned about any slowdown in growth around the world.

The US believes Iran is preparing to carry out a major exercise in the Gulf in coming days, apparently moving up the timing of annual drills amid heightened tensions with Washington, US officials told Reuters on Wednesday.

The kingdom has been under acute pressure from President Donald Trump to open the taps as he chokes off exports from Saudi's political rival, Iran.

Brent prices fell more than 6 percent in June and US crude slumped about 7 percent, the biggest monthly declines for both benchmarks since July 2016. "This could severely dent the competitiveness of US oil and derivatives in the Chinese market", said Abhishek Kumar, senior energy analyst at Interfax Energy.

At the Multi Commodity Exchange, crude oil for delivery in September rose by Rs 15, or 0.33 per cent, to Rs 4,580 per barrel in a business turnover of 16 lots.

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