A surge in demand for diesel and fuel stock draws following USA refinery outages resulting from Hurricane Harvey have further helped thrust crude prices to near $60 a barrel, analysts said.
The price of oil has fallen back on Tuesday after earlier hitting a two-year high. Prices rebounded to end the session in the black, up almost 0.3%.
Meanwhile, the Energy Information Administration (EIA) report projected total world energy consumption will rise 28% between 2015 and 2040, with most growth coming from developing countries. Such a move would have an impact on the price of oil. Resistance on crude oil is seen near the April highs at 53.67. If the recent past has shown us anything, it is that the market outlook can change dramatically in four months.
Imports continue to remain subdued in the wake of Hurricanes Harvey, Irma and Maria that stalled imports into the Gulf and New York Harbor.
Asian oil refiners had progressively widened their net over the last three decades.
Strong fuel demand was compounded by damage caused by Harvey, which hit the U.S. Gulf Coast in August and knocked out nearly a quarter of the country's refineries, resulting in large-scale fuel stock draws and increased imports. David Fyfe, chief analyst at Gunvor Group, a top-five independent trading house, said that in five years the flow could triple to almost 1 million barrels a day.
Now U.S. crude exports are either on smaller tankers, which are relatively costly to operate on long routes to Asia, or the cargoes are transferred at sea to a bigger vessel, a process that can add around $2 a barrel to shipping costs to the major consuming region of Asia.
Refinery crude runs increased by 1 million barrels per day as utilization rates rose by 5.4 percentage points to 88.6 percent of total capacity, its highest rate since Harvey hit on August 25, EIA data showed. Backwardation signals the market is tightening and discourages oil traders from stockpiling barrels. Russian oil production is holding steady, but still represents a slight increase from the average a year ago. And the US refinery hiccup should prove temporary.
OPEC and other oil exporters declined on Friday to extend their agreement to limit production in a bid to drain a global glut that has weighed on prices for three years.
Output at the North African nation's Sharara field has recovered to 230,000 barrels a day, according to a person familiar with the matter, who asked not to be identified because they aren't allowed to speak to the media. Distillate fuel demand averaged over 4.0 million barrels per day over the last month, up by 13.9% from the same period previous year.
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