By Rowena Edwards
LONDON (Reuters) -Oil prices rose on Thursday as a surprise drop in U.S. crude stockpiles and a halt to exports from Iraq’s Kurdistan region offset a smaller than expected cut to Russian supplies.
Brent crude futures rose 57 cents, or 0.73%, to $78.85 a barrel by 1327 GMT, while West Texas Intermediate crude rose 82 cents, or 1.12%, to $73.79.
U.S. crude oil stockpiles fell unexpectedly in the week to March 24 to a two-year low, the Energy Information Administration said on Wednesday. [EIA/S]
Crude inventories dropped by 7.5 million barrels, compared with expectations for a rise of 100,000 barrels in a Reuters poll of analysts.
The continuing halt to exports from Iraq’s northern region provided further support.
Producers have shut in or reduced output at several oilfields in the semi-autonomous Kurdistan region of northern Iraq after the northern export pipeline was shut, with more outages on the horizon, company statements showed.
But the Kurdistan-Iraq premium in oil prices could vanish sooner than expected, Citi analysts said Thursday.
The “changes in Iraq’s domestic politics may lead to a durable political settlement very soon”, Citi said, estimating that pipeline flows could increase by 200,000 barrels per day (bpd).
These factors offset bearish sentiment after a lower than expected cut to Russian crude oil production in the first three weeks of March.
The 300,000 bpd production decline compared with targeted cuts of 500,000 bpd, or about 5% of Russian output, sources familiar with the data told Reuters.
Markets are now waiting for U.S. spending and inflation data due on Friday and the resulting impact on the value of the U.S. dollar.
Meanwhile, OPEC+ is likely to stick to its existing deal on reduced oil output at a meeting on Monday, five delegates from the producer group told Reuters.
“While we think oil prices may remain volatile in the near term, we still expect rising Chinese crude imports and lower Russian production to lift prices over the coming quarters,” UBS said on Thursday.
China’s refined fuel consumption this year is likely to grow 3% from 2019 pre-COVID levels, state energy giant PetroChina said on Thursday.
“If all goes as expected, and we manage to avoid a recession, oil prices will dance around $75-$85/bbl in the coming months,” FGE analysts said in a note.
(Reporting by Rowena Edwards in LondonAdditional reporting by Jeslyn Lerh in SingaporeEditing by Sharon Singleton and David Goodman)