Oil Jumps To Monthly High As Gas Inventories Plummet

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Oil climbed the most in a week as the International Energy Agency and OPEC improved their outlook for demand.

Front-month gasoline futures rose by as much as 6.8 percent to $1.7799 a gallon on the New York Mercantile Exchange.

The report said global oil demand grew very strongly year-on-year in the second quarter of 2017, by 2.4 percent. Plus, the cartel and its allies are said to be considering an extension of their output-cut deal.

The IEA's stronger demand estimate have helped lift oil prices, Matthew Beck, managing director of a US$8 billion (RM33.6 billion) oil and natural gas bond and private-equity portfolio at John Hancock Financial Services Inc in Boston, said by telephone.

OPEC and non-member producers are seeking to extend their output cut agreement.

The agency said global oil supply dropped 720,000 barrels a day last month from July, to 97.7 million barrels a day, largely due to civil unrest in Libya and disruptions to USA production due to Hurricane Harvey. OPEC supply fell by 210,000 barrels, marking the first decline in five months.

Compliance with the cartel's deal to reduce production was 94 percent in August, up from a revised 85 per cent in July.

Phil Flynn, senior market analyst at Price Futures Group, said the weekly drop was the largest in history and that the storms were to blame. "There's more of a bullish mood out there".

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October West Texas Intermediate crude for October delivery jumped $US1.07, or 2.2%, to settle at $US49.30 a barrel in NY - the highest finish since August 9.

Oil last traded above $100 a barrel in 2014, the year in which prices began to slide due to excess supply. November Brent, the global benchmark, climbed 89 cents, or 1.6%, to end at $55.16 a barrel, which was the highest finish since mid-April. The global benchmark crude traded at a premium of $4.77 to WTI.

Meanwhile, the Paris-based IEA said in monthly report that the oil market (http://www.marketwatch.com/story/global-oil-supply-fell-for-first-time-in-4-months-due-to-hurricane-harvey-says-iea-2017-09-13) is starting to tighten due to robust demand and a drop in output from both the Organization of the Petroleum Exporting Countries and other producers.

The agency said global oil supply dropped 720,000 barrels a day last month from July, to 97.7 million barrels a day, largely due to civil unrest in Libya and disruptions to USA production due to Hurricane Harvey.

Crude inventories rose 5.9 million barrels, compared with analysts' expectations for an increase of 3.2 million barrels.

Refinery operations are largely dependent on a supply of crude oil and feedstocks, electricity, safe working conditions, workforce availability, and outlets for production.

"Storage data is going to continue to be choppy, as it was this week, for the next few weeks", Beck said. These refineries have a combined total capacity of 1,724,500 b/d, equal to 17.8% of total Gulf Coast (PADD 3) refining capacity and 9.3% of total USA refining capacity.

However OPEC may be like the dog chasing the vehicle, not sure what it would do if it ever caught it: if prices do rise with any real significance as a result of the cartel's actions, it will be American shale producers, not petrostates, that will be quickest to pounce.

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