Oil prices rise on potential OPEC+ supply cuts; BP closes US refinery units

An oil pump jack pumps oil in a field near Calgary
An oil pump jack pumps oil in a field near Calgary, Alberta, Canada on July 21, 2014.

Oil prices rose on Thursday on growing concerns about supply tightening amid disruptions to Russian exports, the potential for major producers to cut output and the partial shutdown of a US refinery.

Brent crude was up 59 cents, or 0.6%, at $101.81 a barrel by 0400 GMT, while US West Texas Intermediate crude was up 42 cents, or 0.4%, at $95.31 a barrel.

Both benchmark crude contracts hit three-week highs on Wednesday after the Saudi energy minister flagged the possibility that the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, will cut output to support prices.

Discussions on a deal on Iran’s nuclear program also remain stalled, calling into question any resumption of exports.

“Brent crude oil prices returned above $100/barrel after Saudi officials showed willingness to defend prices via an OPEC+ production cut if necessary,” Citi analysts said in a note.

However, uncertainty remains ahead of OPEC+ to justify an output cut amid ongoing negotiations over the Iran nuclear deal, and a worsening macroeconomic picture as the energy crisis worsens, the Citi analysts added.

In the US, the world’s biggest oil consumer, BP reported shutting down some units at its Whiting, Indiana, refinery after an electrical fire on Wednesday. The 430,000 barrel per day facility is a key supplier of fuel to the central United States and the city of Chicago.

Talks between the EU, US and Iran to revive the 2015 nuclear deal are continuing, with Iran saying it had received a US response to the EU’s “final” text to revive the deal.

OPEC sources told Reuters that any OPEC+ cuts would likely coincide with a return of Iranian oil to the market, if Tehran secured a nuclear deal with world powers.

Falling US crude oil and product inventories also contributed to the upward pressure on prices. Oil inventories fell by 3.3 million barrels in the week to August 19 to 421.7 million barrels, steeper than analysts’ expectations in a Reuters poll of a drop of 933,000 barrels.

The bullish effect was offset by a smaller-than-expected decline in gasoline inventories, reflecting tepid demand.

US gasoline inventories fell by 27,000 barrels in the week to 215.6 million barrels, compared with earlier expectations for a drop of 1.5 million barrels.

Overall demand for gasoline in the U.S. fell in the most recent period, leaving the four-week average of daily gasoline products delivered 7% below the same period last year.

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