West Texas Intermediate briefly slumped below US$50 after a brief rally, as EIA data about U.S. crude oil exports showed these had hit a record-high of 1.98 million bpd. This is the highest weekly average since exports were once again allowed, after a four-decade ban. Last week’s figure also beat the previous record set by exporters, which was hit in the previous week, at 1.5 million bpd.
Bloomberg noted that it was oversupply thanks to Harvey that drove the higher exports, and it was also to blame for the current decline in WTI prices and the growth of its discount to Brent. While the combination of the glut—created by refinery shutdowns and the low price resulting from this glut—increased the appeal of U.S. crude for foreign buyers, this state of affairs is not going to last long, according to analysts.
One analyst, John Auers from Dallas-based Turner Mason & Co, said that “This big arbitrage has incentivized exports. As refiners return, the WTI-Brent spread will narrow. Gulf Coast demand recovering from the storm will mean less domestic crude will leave the U.S.”
Indeed, refiners are returning to normal operation before the maintenance season shutdowns, with the EIA also saying in its Weekly Petroleum Status Report that crude oil inventories fell by an impressive 6 million barrels in the week to September 29, versus analyst expectations ranging between a draw of 3 million barrels to a build of 2.7 million barrels.
The effect of the inventory draw on prices, however, was limited by the export figures and by the resumption of production at Libya’s largest field, Sharara, after a two-day outage. Reports of higher OPEC production in September are also holding back prices and limiting the positive effect of statements such as Russian President Vladimir Putin’s suggestion yesterday that the OPEC/non-OPEC output cut agreement could be extended until the end of next year.
Limited or not, the positive effect was visible in the latest intraday price developments. At the time of writing, WTI traded at US$49.99 a barrel, with Brent crude at US$55.92.