Cairo–Following OPEC’s historic agreement at the Algiers meeting to cut down production, oil demand was on the rise, reaching $52 per barrel.
U.S. Energy Information Administration (EIA) said U.S. crude stockpiles fell last week despite slow refinery activity while oil inventories increased.
Crude inventories dropped 3.0 million barrels in the week to Sept. 30, opposite to what analysts had expected.
Refinery crude runs fell 302,000 barrel per day (bpd) and utilization rates fell by 1.8 percentage points.
In a poll done by Reuters, analysts expected gasoline stocks to increase 702,000-barrel, when in reality it only rose 222,000 barrels.
EIA announced that U.S. crude imports fell marginally last week, slipping by 58,000 barrels per day.
Shale oil threatens the stability of Brent oil prices, which supports OPEC’s strategy to maintain low levels of production, yet the decline in prices forced oil drilling companies to decrease its drills to 18 a week and a total of 963 in 2015, the lowest rate since 1988.
U.S. Crude Oil increased five dollars since OPEC agreed on decreasing its production last week.
“You don’t manage the market unless you have a price in mind,” said Gary Ross, founder and executive chairman at the New York-based consultancy PIRA.
“They are being cautious; they want to see what will happen with shale. But OPEC’s price aspirations only go up over time. They don’t go down,” Ross told Reuters.
U.S. oil output fell to around 8.7 million bpd in July, the lowest since May 2014 and down over 730,000 bpd on the year, mostly as shale producers hit by low oil prices cut output.
Ross opposed the assumption that a higher price could be self-defeating for OPEC because it will encourage shale producers to boost output.
“We’re not necessarily about to be overwhelmed by shale oil,” he said. “The timing of this is quite deliberate; OPEC is doing this heading into winter and at a time when supply from non-OPEC producers is down.”
He explained that after letting thousands of employees go over the past two years, it will take time for shale producers to build up operations and costs will rise quickly.
The $4 rise in prices is already worth over $100 million a day in additional revenue for OPEC producers pumping around 33 million bpd of crude.