The case of the missing 6.5 million barrels

West Texas Intermediate and Brent oils rose after an industry report showed that U.S. crude inventories declined last week.

WTI advanced as much as 1.6%. Supplies fell by 6.5 million barrels in the week ended Nov. 28, American Petroleum Institute data showed yesterday, according to Anthony Headrick, an analyst at CHS Hedging. An Energy Information Administration report today will probably show stockpiles expanded by 1.75 million barrels, according to the median estimate in a Bloomberg survey of eight analysts.

The global benchmark oils fell 18% last month after the Organization of Petroleum Exporting Countries maintained its output target at 30 million barrels a day, opting to let low oil prices force U.S. shale producers to cut supply. Saudi Arabia won’t give up market share “at this time for anybody,” said Prince Turki Al-Faisal, the kingdom’s former intelligence chief.

“We’re getting a bounce after the surprise supply drawdown in yesterday’s API report,” Phil Flynn, senior market analyst at the Price Futures Group in Chicago, said by phone. “The big picture hasn’t changed though. The Saudis appear to be digging in their heels and want to protect market share from U.S. producers.”

WTI for January delivery climbed 80 cents, or 1.2%, to $67.68 a barrel at 9:04 a.m. on the New York Mercantile Exchange. Futures touched $63.72 on Dec. 1, the lowest price since July 2009. Total volume traded was 21% lower than the 100-day average for the time of day.

U.S. Output
Brent for January settlement (NYMEX:SCF15) rose 49 cents, or 0.7%, to $71.03 a barrel on the London-based ICE Futures Europe exchange. Volume was 20% above the 100-day average. The European benchmark crude traded at a $3.35 premium to WTI.

Production in the U.S., the world’s biggest oil consumer, increased to 9.08 million barrels a day through Nov. 21, said the EIA, the Energy Department’s statistical arm. That’s the fastest pace in weekly records that started in January 1983.

U.S. crude supplies have declined during December for nine of the last 10 years, according to EIA data. Gulf Coast refiners curb deliveries at the end of the year to reduce local taxes.

“This could be the start of the annual end of the year reduction in supply,” Flynn said. “Deliveries are delayed because of tax considerations and then start again with the start of the new year.”

Kuwait, Iraq
Oil producers outside OPEC are “drowning” the market, Kuwait’s Oil Minister Ali al-Omair told parliament, according to the state news agency Kuna. The country won’t take a unilateral decision to boost prices or sacrifice its interests by cutting output, he said.

Iraq, OPEC’s second-largest producer, reached a deal with Kurdish authorities to export oil through Turkey. It will ship as much as 550,000 barrels a day from northern Iraq to the Mediterranean port of Ceyhan along a pipeline operated by the Kurds, according to Safeen Dizayee, a spokesman for the Kurdish Regional Government. The pact will entrench the global supply surplus, predicted BNP Paribas SA.

Saudi Arabia might consider reducing output if there were “reasonably guaranteed oversight” of quotas and assurances that other countries wouldn’t take the kingdom’s market share, Al-Faisal said at an event in London yesterday.

OPEC exceeded its collective target for a sixth straight month in November, even after reducing supply. The 12-member group pumped 30.56 million barrels a day, 424,000 barrels a day less than in October, according to a separate Bloomberg survey of oil companies, producers and analysts. It’s next scheduled to meet on June 5.

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