Oil rises after drop in United States gasoline stocks, but market remains bloated

Energy Information Administration data published Wednesday showed gasoline inventories in the USA fell by 900,000 barrels (http://www.marketwatch.com/story/oil-prices-tumble-as-investors-brace-for-possible-spike-in-us-supply-2017-02-08) in the most recent week, upending an expectation for an increase.

Oil steadied close to $57 per barrel, yesterday, as rising tensions between the United States and Iran and Organisation of Petroleum Exporting Countries, OPEC, supply cuts were countered by ample inventories and signs that higher prices will revive US output. However, industry group American Petroleum Institute reported a slightly bigger crude build of 14.3 million barrels on Tuesday, so the EIA data confirmed already lofty expectations.

"We're still seeing the impact of elevated production from OPEC ahead of the cuts", Craig Bethune, a fund manager at Manulife Asset Management in Toronto who focuses on energy and natural resources investments, said by telephone.

The fall in petrol stocks suggested U.S. consumption was stronger than expected, and may be healthy enough to support prices at time when most fuel oil markets are very well stocked.

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"U.S. gasoline draws are supporting prices today", said Tamas Varga, senior analyst at London brokerage PVM Oil Associates.

"Over the last four weeks, crude oil imports averaged about 8.5 million barrels per day, or 10 percent above the same four-week period previous year", said the report.

Dutch bank ING said so far seven out of the 13 OPEC members have reached their output targets, roughly equivalent to a 70% compliance rate, with Saudi Arabia taking the lead by cutting its production to 9.98 million barrels a day, a steeper cut than it originally pledged.

That massive paper position is equal to just over nine days of global oil demand, and has prompted some traders to express concern prices could fall if funds move to take profits by selling positions en masse. The draws that we expect will start from a high base... While OPEC members implement pledged cuts and Russian Federation says its own reductions are ahead of schedule, USA production has edged higher as drillers targeting crude boosted the rig count to the most since October 2015.

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Investors are betting big that OPEC's cuts are real. At the same time, Russian oil pipeline export grew from 4,358 to 4,409 million bpd as the deal wasn't related to exports but only to production.

"We remain highly sceptical of the overnight price action", said Jeffrey Halley, senior market analyst at futures brokerage OANDA, referring to rising crude.

Tension between Tehran and Washington has risen since an Iranian missile test which prompted U.S. President Donald Trump's administration last week to impose sanctions on individuals and entities linked to the Revolutionary Guards.

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