Oil prices rise strongly on U.S. inventory data

Internationally traded Brent crude futures were up over half a dollar at $44.13 per barrel.

US production last week totaled 9.182 million barrels a day, slightly lower than the 9.185 million in the week earlier.

“It’s a bullish signal for macro traders”, said Virendra Chauhan, analyst at Energy Aspects.

Money managers cut their net long US crude futures and options positions to the lowest in three months during the week to November 10, the U.S. Commodity Futures Trading Commission (CFTC) said on Monday. The long-term oversupply concerns and global inventory could drag crude oil prices lower.

On the NY Mercantile Exchange, light, sweet crude futures for delivery in December CLZ5, +1.60% traded at $41 a barrel at 0450 GMT, up 33 cents in the Globex electronic session.

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“The market is actively seeking storage solutions”, Jefferies said in a note, but with January 2017 prices around $6 a barrel above those for January 2016, the spread is too low to make floating storage attractive as freight costs still have to be included. An OPEC delegate from a Gulf producing country said he believed that in the mid-term oil prices could get a few support due to rising tensions especially if the global community takes more steps to reduce smuggling of oil and hits oil facilities under Islamic State’s control in Syria and Iraq.

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Most open interest in options expiring in December is clustered around put options – which give the holder the right, but not the obligation, to sell Brent futures – at $40 a barrel.

The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.

Goldman Sachs said there remained a downside risk to oil prices “as storage utilization continues to climb”. “We all know the next level below (that) is the Great Recession low of around $32 [for oil prices]”, McGillian told CNBC.The prediction comes on news that domestic crude inventories increased last week, albeit below the forecasted build among analysts.

Last fall, it appeared unlikely that the Organization of the Petroleum Exporting Countries (OPEC) would cut its crude oil production. That’s the cheapest price since the final week of August when market mayhem rocked Wall Street amid fears about China’s economic slowdown.

Despite the glut in oil, it noted that supply shows no sign of ebbing with major Middle Eastern producers pumping at record levels and USA stockpiles increasing.