WTI futures hover near five-week highs on US supplies drop, GDP and employment data in focus

West Texas Intermediate crude held near yesterdays five-week high after the Energy Information Administration reported U.S. crude inventories fell more than expected in the seven days through November 29, snapping 10 straight weeks of builds. Market players attention turned to upcoming crucial GDP and employment data from the United States due on Thursday and Friday to assess whether the Federal Reserve might begin paring its monthly bond purchases in December. Gains remained in check after OPEC members left the groups production target unchanged at 30 million bpd for the next six months with prospects for increased supply from Iraq, Iran and Libya.

On the New York Mercantile Exchange, WTI crude for delivery in January traded at $97.34 per barrel at 8:20 GMT, up 0.14% on the day. Prices shifted in a narrow range between days high of $97.44, near Wednesdays five-week high of $97.57, and days low at $97.02. The U.S. benchmark was mostly unchanged yesterday after rising for 3 consecutive days and extended its weekly advance to nearly 5% on Thursday. The contract has declined in seven out of the last eight weeks.

Meanwhile on the ICE, Brent futures for settlement in January were mostly unchanged at $111.78 per barrel at 8:19 GMT, down 0.09%. Prices ranged between days high and low of $111.81 and $111.49 a barrel respectively. The European benchmark broke through the $113 mark on Wednesday hitting the highest since September 12 but retreated by 1.1% on daily basis following the OPEC deal.

Oil prices were supported yesterday after the Energy Information Administration reported the first decline in US crude inventories in eleven weeks. Supplies fell by 5.6 million barrels in the seven days through November 29, exceeding more than ten times the median estimate of analysts surveyed by Bloomberg. At 385.8 million, inventories were well above the upper limit of the average range for this time of the year.

Supplies at Cushing, Oklahoma, the biggest US storage hub and delivery point for NYMEX-traded contracts, fell by 18 000 barrels to 40.6 million, the first drop in eight weeks.

U.S. crude imports averaged 7.8 million barrels per day last week, up by 91 000 barrels from a week earlier. Inbound shipments averaged 7.8 million bpd over the last four weeks, 2.4% below the comparable period a year earlier. Domestic output eased by 0.1% to 8.01 million barrels per day from the preceding weeks all-time record high production pace.

The report also showed that refinery utilization picked up in the seven days to November 29, suggesting supplies will most likely decline further in the upcoming weeks. Refineries operated at 92.4% of their operable capacity, up from 89.4% a week earlier, and exceeded analysts’ expectations. Gasoline production fell last week, while distillate fuel output increased, averaging 9.0 and 5.1 million barrels per day, respectively.

Motor gasoline inventories rose by 1.8 million barrels, underperforminng expectations for a 1.3 million jump, and remained in the upper half of the average range for this time of the year. Distillate fuel stockpiles, which include distillates and heating oil, rose by 2.6 million barrels, confounding projections for a 1.5 million drop, but remained below the lower limit of the average range.

Fed stimulus outlook

Also fanning positive sentiment for demand prospects in the worlds top consumer, Automatic Data Processing Inc. reported yesterday that U.S. private employers added 215 000 jobs last month, the biggest increase in a year, confounding analysts projections for a decline to 170 000. Octobers reading received an upward revision to 184 000 from initially estimated at 130 000, suggesting the US economy fared better than economists thought in October.

Despite brightening the demand outlook, the better-than-expected data led to speculations Fridays non-farm payrolls and unemployment rate could also be upbeat, reinforcing the case for a probable reduction in Feds monthly bond purchases at FOMCs December 17-18 meeting.

On Thursday, the Labor Department is projected to report last weeks initial jobless claims slightly increased from the preceding period. In a separate report, the Commerce Department will likely say that the U.S. economy grew more than initially estimated in the three months through September, further fueling speculations for an earlier-than-expected tapering. Third quarter personal consumption expenditures are expected to have risen by 1.5%, the same as in the preceding three-month period.

OPEC output

Meanwhile in Vienna, members of the Organization of the Petroleum Exporting Countries agreed on Wednesday to keep the groups production target unchanged at 30 million barrels per day until June, when envoys will reconvene.

Despite reaching a mutual decision yesterday, the market was pressured as the meeting revealed members may face problems agreeing to a cut in output next year, with Iran, Iraq and Libya planning to raise production.

Iran named seven Western oil companies it wants to back at its fields, if the interim nuclear deal it recently struck with six major powers goes through and international sanctions are lifted. Meanwhile, Libyas oil minister said he hopes to bring back online all of the countrys blocked export terminals on December 10 and resume full production a week later, but analysts expected outages in the African country to be sustained for a while longer.

Iranian Oil Minister Bijan Zanganeh, said, cited by CNBC: “Under any circumstances we will reach 4 million bpd even if the price falls to $20 a barrel. We will not give up on our rights on this issue.”