Oil prices pushed higher on last week, after U.S. government data showed a larger-than-expected drop in U.S. Oil stockpiles. The price of light sweet crude oil for February delivery rose 0.6% to $57.92 a barrel and Brent oil, gained 0.5%, to $64.14 a barrel. According to the U.S. Energy Information Administration, crude stockpiles fell by 6.5 million barrels in mid-December.
“Since the demand for gas is so inelastic, gas prices are one of the main drivers of consumer sentiment, and the price of gas depends on the price of oil” said Keith Knutsson of Integrale Advisors.
Analysts say the decline in the U.S. stockpile was largely due to refineries increasing production in the last couple of weeks, taking crude oil out of storage. Furthermore, oil prices have seen support from the recent disruption of supply from a major pipeline in the North Sea.
As of last week, the Forties Pipeline closed down due to a crack in the well. This resulted in the disruption of the flow of 450,000 barrels of oil a day. A representative from the pipeline has stated that the outage could last for
another couple of weeks.
The concerns about oil supply come as inventories in the OPEC market have reached a “normalized level”. This is a result of the ongoing efforts by the Organization of the Petroleum Exporting Countries and other major producers to limit output.
OPEC and 10 producers outside the organization, agreed to hold back crude oil output by nearly 2% in an effort to limit the global supply glut that has weighed on prices since 2014. In November, the group decided to extend the deal through the end of 2018, with a review period in the middle of the year. Gasoline futures are up 1.8% to $1.7270/gallon and diesel futures are trading at $1.9407/gallon.