Surprise rise in USA crude stocks nudges oil prices down

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Prices had fallen on December 11 after a report showed an unexpected increase in US crude inventories.

US crude oil imports averaged 6.89 million barrels per day (b/d) last week, up by 899,000 b/d from the previous week, while crude oil exports averaged about 3.40 million b/d, up by about 265,000 b/d from the previous week, according to the Weekly Petroleum Status Report.

Meanwhile, followed by release of Wednesday's (December 11th) EIA report, the Energy Information Administration was also quoted saying that the U.S. crude inventories stood at least five per cent higher than a five-year average for this time of the year. Saudi Arabia said it will voluntarily cut an additional 400,000 barrels a day from its production, bringing the total reduction to 2.1 million barrels a day.

Energy services firm Baker Hughes said in its closely watched weekly drilling report on Friday that the USA drill count fell in the week to December 6 - a seventh week of decline.

Brent crude traded at around $64.20 a barrel Thursday morning, up about 0.8% for the day and almost $2 a barrel higher in the past 30 days.

"At this time, everyone was expecting we would have strong draws in the inventory, but it was a build", said Tony Nunan, oil risk manager at Japanese trading house Mitsubishi Corp. Granted, the gain was only 0.8 million barrels, but analysts had predicted a significant decline of 2.9 million.

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Winter storms that brought heavy snows on several US states last week impacted domestic gasoline demand and likely caused inventories to rise, said Phil Flynn, senior energy analyst at Price Futures Group in Chicago. "The market is reacting to headline number, but we don't see this as a trend, we see it as a one-off", Flynn said.

USA crude stocks clocked a surprise rise in the most recent week while gasoline and distillate inventories rose, data from industry group the American Petroleum Institute shows.

The focus, however, was more on OPEC which said it now expected a small oil market deficit in the next year, suggesting the market is tighter than previously thought.

The IEA estimates total USA oil production growth will slow to 1.1 million bpd in 2020 from 1.6 million bpd this year. The focus now shifts to trade ahead of a Sunday deadline for the imposition of USA tariffs on Chinese goods.

OPEC and allied oil producers led by Russian Federation last week chose to deepen supply cuts amid a weak outlook for oil demand growth next year.

"The market seems to have stalled".

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