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Crude Oil Surges 1% as US Supplies Post Bigger-Than-Expected Weekly Decline

Summary:
Crude oil futures are surging more than 1% in the middle of the trading week after the US government reported a bigger-than-expected decline in domestic inventories. Global crude markets are also getting a lift on the sanctions slapped against Iran and Venezuela, a move that could tighten international supplies. But the gains were capped on fears that the US-China trade war will cool demand. June West Texas Intermediate (WTI) crude futures soared %excerpt%.062, or 1.01%, to .02 per barrel at 15:00 GMT on Wednesday on the New York Mercantile Exchange. Although US crude prices are on track for a weekly drop of around 2%, they are up more than 30% year-to-date. Brent, the international benchmark for oil prices, is also rallying midweek as July futures are up %excerpt%.38, or 0.54%, to .26 a barrel

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Crude oil futures are surging more than 1% in the middle of the trading week after the US government reported a bigger-than-expected decline in domestic inventories. Global crude markets are also getting a lift on the sanctions slapped against Iran and Venezuela, a move that could tighten international supplies. But the gains were capped on fears that the US-China trade war will cool demand.

June West Texas Intermediate (WTI) crude futures soared $0.062, or 1.01%, to $62.02 per barrel at 15:00 GMT on Wednesday on the New York Mercantile Exchange. Although US crude prices are on track for a weekly drop of around 2%, they are up more than 30% year-to-date.

Brent, the international benchmark for oil prices, is also rallying midweek as July futures are up $0.38, or 0.54%, to $70.26 a barrel on London’s ICE Futures exchange. Brent prices are down nearly 3% over the last five trading sessions, but they, too, have advanced close to 30% so far this year.

According to the US Energy Information Administration, domestic crude inventories fell by four million barrels for the week ending May 3. This is higher than the market forecast of 2.2 million barrels. US oil output climbed to 12.3 million barrels per day (bpd). Distillate stockpiles slipped by 200,000 barrels, while gasoline supplies tumbled 980,000 barrels.

The US Baker Hughes total oil rig count came in at 807, up from last week’s 805.

Oil prices needed this gain after falling this week due to the White House announcing it would raise tariffs to 25% on $200 billion worth of Chinese goods, as well as new levies on $325 billion in additional Chinese imports. With fears that a trade war between the world’s two largest economies would intensify, investors have been selling off equities. Oil has been no exception because there are concerns that an economic slowdown would cool demand for crude.

This view was supported by EIA projections that showed global demand growth would drop by 20,000 bpd to 1.38 million bpd. US production is seen to rise to 12.45 million bpd by the end of 2019.

Meanwhile, analysts anticipate tightening global supplies after US sanctions on Iran and Venezuela were installed. Although Tehran has vowed to defy the sanctions, experts estimate exports to slide to a little more than 500,000 bpd. It is unclear as to how much Caracas will see its exports decline, considering the political turmoil unfolding in the Latin American country.

Saudi Arabia is expected to increase output, offsetting Iran’s production loss.

In other energy commodities, June natural gas futures spiked $0.07, or 2.8%, to $2.61 per million British thermal units (btu). June heating oil futures edged up $0.005, or 0.28%, to $1.95 a gallon. June heating oil futures rose $0.02, or 1.04%, to $2.05 per gallon.

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Andrew Moran
I am a full-time professional writer. Prior to my self-employment, I worked as a reporter for Digital Journal covering the politics beat and The Toronto Times reporting on the city’s entertainment scene. I currently write mostly about business, marketing and finance

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