Global oil prices rose Wednesday due to a surprising drop in US oil inventories and concerns over the potential effect on oil supply from fighting in Mali.
The price of West Texas Intermediate for February delivery settled at $94.24 a barrel, up 96 cents. The price of Brent futures closed at at $110.61, up 31 cents.
The oil market was caught off guard by the weekly US petroleum inventory report from the US Energy Information Administration (EIA), which said oil stockpiles dropped by 1 million barrels in the week of January 11. Analysts had forecast a build of 2.1 million barrels.
“The EIA report was sufficiently supportive, especially for crude oil with that surprise draw-down,” said Again Capital’s John Kilduff.
Kilduff said the market is also watching for the effects of the recent expansion of the Seaway pipeline, which will alleviate a glut of oil at the Cushing, Oklahoma terminal.
“As we look ahead to the full implementation impact of the Seaway pipeline, you will see WTI getting some strength,” Kilduff said.
Market watchers were also eying the latest developments in Algeria, where Islamic radicals have taken hostage some 41 foreigners after an attack on a gas field the country’s east.
The gas field, jointly operated by British oil giant BP, Norway’s Statoil and state-run Algerian energy firm Sonatrach, is located 1,300 kilometers (810 miles) southeast of Algiers, close to the Libyan border.
The attack was the first reprisal by the Islamists for the French assault on Mali that began on January 11.
Andy Lipow of energy consulting firm Lipow Oil Associates doesn’t expect a near-term disruption due to the Algeria situation.
But, he added, “the problem is should this type of incident start spreading throughout Algeria and Libya … there would be a concern.”
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