Brent crude rose to around $106 a barrel on Wednesday following gains in the US oil benchmark after an industry report showed lower inventories at the US delivery point and robust heating fuel demand from cold weather.
The American Petroleum Institute’s report on Tuesday said crude stocks at Cushing, Oklahoma fell by 1.6 million barrels last week and that distillate inventories, which include heating oil, fell by 1.5 million barrels.
Global marker Brent crude was up 16 cents at $105.95 at 1154 GMT after three straight sessions of losses. US crude , also known as WTI, rose for a second session to $97.90, up 71 cents.
“The oil price is anchored around $106,” said Christopher Bellew, a broker at Jefferies Bache in London. “Eventually, it will probably break to the upside, supported by geopolitical considerations, possible supply disruptions in the North Sea and the colder weather in the United States.” US crude also drew support from the US government’s granting of two licences to re-export foreign crude to the UK and another two to Italy, raising hopes that such shipments may ease a US supply glut.
The discount of US crude to Brent narrowed on Wednesday to its smallest since mid-October as traders expected the startup of a pipeline from Cushing to refineries on the US.
Gulf coast to drain excess oil from the oil hub.
Other analysts saw little to push Brent much higher due to higher output in Libya and the North Sea.
“Rising supply is likely to continue to exert downward pressure on the price of Brent,” said Carsten Fritsch, an analyst at Commerzbank. “In contrast, the WTI price has benefited from bullish API stock data.” On the charts, Brent has support at $105.00-$105.50, said Andrey Kryuchenkov, an analyst at VTB Capital, which is at the bottom of its trading range. Gains are limited near the top of the range at $108.50-$109.00, he said.
In Libya, exports from the El Sharara oilfield have resumed, while the North Sea’s Buzzard field, which helps underpin the Brent market, restarted production after an outage on Monday.
Despite a recent increase, protests and unrest in Libya have been keeping more than half of the country’s oil output off the market. A six-month blockade on Libya’s eastern oil ports continued.
Overall US crude inventories rose by 384,000 barrels, according to the API, and traders will be looking to the government’s weekly supply report at 1530 to confirm the trend in stock movements.
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