Oil. Picture: REUTERS
Oil. Picture: REUTERS

London — Oil prices steadied on Friday as a rise in stocks of refined petroleum products offset a big fall in US crude inventories to their lowest level since 2015.

Brent crude futures edged down 10c to $76.40 a barrel by 9.17am GMT. US West Texas Intermediate (WTI) crude futures lost 3c at $67.74 per barrel.

US commercial crude oil inventories fell by 4.3-million barrels to 401.49-million barrels in the week to August 31, the lowest since February 2015, US Energy Information Administration (EIA) data showed on Thursday.

However, sentiment suffered due to a rise in refined product stocks coupled with relatively weak demand for fuel during this summer’s US driving season — when consumption normally peaks.

Petrol stocks rose by 1.8-million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 3.1-million barrels, the EIA said.

"[Petrol] stocks ... are now 3.5% above the level a year ago. More worryingly, the surplus to the five-year norm now stands at 5.4%, the highest since June 2017," Stephen Brennock of London brokerage PVM said. "This bears all the hallmarks of a disappointing summer driving season. As a result, the alarm bells are now ringing that a petrol glut will persist for the foreseeable future."

On the supply side, US crude oil production last week remained at a record 11-million barrels per day (bpd), a level it has largely been at since July.

Outside the US, US sanctions against major oil producer Iran are fuelling expectations of a tighter market towards the year-end.

"The main driver of oil prices, in our view, remains the re-imposition of US ... sanctions against consumers of Iranian oil," Standard Chartered said this week.

"We have cautiously subtracted only 500,000 bpd from Iranian supply, assuming its production at 3.3-million bpd for 2019 and 2020," SEB Markets commodities analyst Bjarne Schieldrop said.

Saudi Arabia will need to keep production between 10.5-million bpd and 10.7-million bpd to the end of 2020 "to prevent oil prices from spiraling higher", he added.

Washington has indicated it may offer temporary sanction waivers to allied countries that are unable to cease imports immediately from Iran.