Brent crude rises $85 on surprise drawdown in US crude stockpiles
Brent crude, the benchmark for Nigeria’s crude oil, extended gains into a fourth session on Wednesday, sustained as industry data showed a surprise decline in US crude inventories and geopolitical tensions over the disappearance of a prominent Saudi journalist stoked supply worries.
Data from US-based American Petroleum Institute (API) showed after Tuesday’s settlement US crude inventories fell by 2.1 million barrels last week, compared with analyst expectations for a build of 2.2 million barrels.
“The market is reacting to the unexpected decline as inventories tend to rise at this time of year,” Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting in Tokyo told Reuter.
Brent crude was down $1.48, or 1.82 percent, at $79.93 a barrel by 4 pm after gaining $1.15 in the previous three sessions. The global benchmark, which hit a two-week low last week as equity markets dropped, is trading around $6 below a four-year high of $86.74 reached on October 3.
Gbolahan Ologunro, an industry research analyst at CSL Stockbrokers Limited, told BusinessDay that the oil market appeared to be caught in a frenzy of reinforcing forces that could trigger a rally in oil prices.
“The confluence of hurricane in the US, expectation of a reduction in output in Iran owing to Trump sanctions coupled with the recent standoff between Saudi Arabia and US which has added to the layers of geopolitical tensions in the Middle East could precipitate uptick in oil and prices towards $100 a barrel,” Ologunro told BusinessDay on phone.
The API data also showed US gasoline stocks dropped by a larger-than-expected to 3.4 million barrels, while distillate fuel stockpiles declined by a smaller-than-expected number of 246,000 barrels.
Also underpinning sentiment is the scandal over the disappearance of prominent Saudi critic and journalist Jamal Khashoggi, who disappeared two weeks ago after entering the Saudi consulate in Istanbul.
US President Donald Trump gave Saudi Arabia the benefit of the doubt in the case even as US lawmakers pointed the finger at the Saudi leadership and Western pressure mounted on Riyadh to provide answers.
Saudi Arabia has said it would conduct an investigation into the disappearance, US Secretary of State Mike Pompeo said before departing the kingdom for Turkey.
Most of the big names that were due to attend Saudi Arabia’s investment conference next week have bailed out following the unexplained disappearance of the journalist.
IMF managing director, Christine Lagarde, joined the list of dropouts on Wednesday, closely followed by the heads of two of France’s biggest banks.
Wall Street’s biggest names withdrew earlier this week, as did some of Europe’s top executives in finance.
High-profile participants who have already pulled out include CEO of JPMorgan Chase CEO Jamie Dimon, Ford executive chairman Bill Ford, CEO of Uber Dara Khosrowshahi, CEO of Blackstone Stephen Schwarzman, CEO of Blackrock Larry Fink, CEO of MasterCard Ajay Banga, CEO of Viacom Bob Bakish, CEO of HSBC John Flint, CEO of Credit Suisse T Thiam, and a host of others.
Also, the chief executives of a handful of prominent Asian and European companies who are still planning to attend or are refusing to talk about their plans are US Treasury Secretary Steven Mnuchin, Siemens CEO Joe Kaeser, EDF CEO Jean-Bernard Lévy and Thales CEO Patrice Caine while SoftBank CEO Masayoshi Son and Accor CEO Sébastien Bazin are yet commented on whether they still plan to attend.
The biggest question mark hangs over the attendance of US Treasury Secretary Steven Mnuchin, who is still scheduled to attend. President Donald Trump said a final call would be made by Friday.
Khashoggi, a Washington Post columnist, has not been seen since he entered the Saudi consulate in Istanbul on October 2.
Turkish officials have told CNN he was killed inside the consulate. Saudi authorities have so far maintained that Khashoggi left the consulate the same day, but they have provided no evidence to support the claim.