Oil Higher in Wednesday Trade

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange nearest delivered oil futures and Intercontinental Exchange Brent futures moved higher Wednesday morning, with the West Texas Intermediate contract lifted by an unexpected weekly supply draw in U.S. commercial crude stocks, while an official forecast shows slower-than-expected growth in U.S. oil production this year.

In midmorning trade, WTI April contract gained $0.93 near $57.80, while ICE Brent futures edged up fractionally to $67.18 barrel (bbl). April RBOB futures reached a fresh $1.8418 better-than 4-1/2-month high on the spot continuous chart, trading up 2.4 cents at $1.8395 gallon. April ULSD futures edged higher at $1.9965 gallon following a slight weekly increase of 195,000 bbl in distillate inventory reported by industry data.

American Petroleum Institute reported late Tuesday a surprise draw in commercial crude stocks for the week ended March 8. According to API data, crude supplies in the United States fell by 2.58 million bbl during the week profiled, while the market expected an increase of 2.75 million bbl.

The Energy Information Administration will publish its weekly supply report at 10:30 a.m. ET Wednesday.

WTI futures were also lent upside support by a forecast from EIA detailing a slowdown in expected growth in U.S. commercial crude production for the current year. Tuesday afternoon, EIA said U.S. oil production will grow at 12.3 million barrels per day (bpd) in 2019, an 110,000 bpd downward revision, while in 2020 U.S. oil production was revised down by 200,000 bpd from prior month to 13.0 million bpd.

EIA expects the United States will be a net exporter of crude oil and petroleum products in the fourth quarter of 2020, with exports averaging 1.1 million bpd, a 300,000 bpd upward revision from the February forecast.

In other news, Libya's Sharara oilfield is expected to reach an output rate of 300,000 bpd in two weeks, according to Reuters. The production rate currently stands at 183,000 bpd, according to the report, pointing out that maintenance work in the field is still ongoing following the lifting of force majeure, which was imposed by the National Oil Corporation last December.

The tightening global oil market is led by aggressive production cuts from Organization of the Petroleum Exporting Countries, with Saudi Arabia holding oil output well below the level required as part of an OPEC+ agreement reached in Vienna late last year. Tumbling crude production by OPEC member Venezuela, which is exempt from the OPEC six-month production agreement, is also tightening the market amid U.S. sanctions further aggravated by an ongoing widespread power outage. Reports indicate Venezuelan crude production fell below 1.0 million bpd, with output reported at 1.106 million bpd in January. February production data will be released by OPEC Thursday morning.

Liubov Georges can be reached liubov.georges@dtn.com