Crude hits new 2015 high on US inventory drawdown, weak US dollar

By James Dennis

SINGAPORE (ICIS)–Crude futures hit new 2015 highs on Wednesday, rising by more than $1/bbl, buoyed by an unexpected drawdown in US crude stocks and a weaker US dollar.

At 06:43 GMT, June Brent crude on London’s ICE futures exchange was trading at $68.60/bbl, up by $1.08/bbl from the previous close. Earlier, the North Sea benchmark rose to a session high of $68.67/bbl, up by $1.15/bbl and the highest level  since 8 December 2014.

June NYMEX light sweet crude futures (WTI) were trading at $61.60/bbl, up by $1.20/bbl from the previous close. Earlier, the US benchmark rose to a high of $61.69/bbl, up $1.29/bbl, the highest level since 10 December 2014.

ICE Brent crude futures are now up more than 50% from the low of $45.19/bbl hit on 13 January 2015.

Weekly data from the American Petroleum Institute (API) revealed an unexpected 1.5m bbl/day fall in US crude stocks – the first drawdown in crude stocks in 2015. The figures also revealed a decline in stocks at the key Cushing Oklahoma delivery hub for WTI crude. Traders now await the release of more widely followed inventory data from the  US Government’s Energy Information Administration (EIA).

The US dollar weakened against leading currencies on Wednesday, making US dollar-denominated commodities, such as crude oil more attractive to overseas buyers. The euro continued to strength against the dollar after the European Commission raised its growth forecasts for the eurozone to 1.5% for 2015 despite the Greek economic crisis.

Concerns over falling Libyan production provided further upside pressure to prices. Libyan production was estimated to have declined to around 400,000 bbl/day after protestors closed off a pipeline connecting oil fields to the eastern port of Zuitina.

Saudi Arabia has issued its official prices for June. Saudi Arabia has left the benchmark Arab Light prices for Asian customers unchanged at Oman/Dubai average prices minus $0.60/bbl FOB (free on board) Ras Tanura. However, there were cuts for lighter grades and modest increases for heavier grades for Asian buyers. Price for customers in Europe and the Mediterranean regions were increased. Meanwhile, there were more modest increases for US customers for most grades.

The new Saudi official prices reflected moves by the OPEC heavyweight to defend market share in Asia where growth in demand continues. Saudi Arabia’s crude production has been near record highs at over 10m bbl/day. Meanwhile, domestic Saudi demand is expected to increase in the coming months due to the peak summer electricity demand. 

Saudi-led coalition of Arab forces are continuing to provide military support to Yemeni government forces who are battling Shi’ite Houthi rebels in Yemen. Saudi Arabia claims that Houthi fighters are backed by Iran.

Houthi rebels have continued to attack Yemeni government forces in the key port city of Aden, which controls access to the Bab al-Mandeb Strait and the Red Sea one of the world’s oil transit chokepoints, according to the US government’s Energy Information Administration (EIA).

Additional reporting by Wong Kawai and Ignacio Solotongo

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections