Oil Extends Gains as Industry Data Shows Crude, Gasoline Draws

(Bloomberg) -- Oil extended gains after an industry report was said to show both U.S. crude and gasoline stockpiles tumbled last week.

Futures rose in post-settlement trading in New York after data from the American Petroleum Institute was said to show U.S. crude stockpiles fell by 5.09 million barrels last week, while gasoline supplies dropped by 7.7 million. The gasoline draw would be the largest since early September if an Energy Information Administration tally confirms it on Wednesday.

“Those are big numbers,” Kyle Cooper, director of research at IAF Advisors in Houston, said by telephone. “Of course, what the EIA shows tomorrow could be significantly different but if it’s anywhere close to this, that continues a very bullish inventory trend.”

The global benchmark Brent crude this month topped $60 a barrel for the first time since July 2015 while the dominant U.S. grade, West Texas Intermediate, touched an eight-month high as Saudi Arabia and Russia signaled support for extending production caps well into 2018.

The market was also buoyed by conflict between the Iraqi central government and semi-autonomous Kurds that threatened crude supplies from northern fields. The wild card remains North American shale’s potential to upend any coordinated moves to keep a lid on global production.

The output restraints by OPEC and allies such as Russia are “tightening the market supply-demand fundamentals,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone. “I don’t think we have any indications that the rebalance has completely been priced into the market.”

West Texas Intermediate crude for December delivery traded at $54.59 at 4:36 p.m. after settling at $54.38 a barrel on the New York Mercantile Exchange. Total volume traded was about 22 percent below the 100-day average.

Brent for December settlement, which expired Tuesday, advanced 47 cents to end the session at $61.37 on the London-based ICE Futures Europe exchange. The more-active January contract rose 35 cents to settle at $60.94. Brent traded at a premium of $6.99 to WTI.

The recent price surge for West Texas Intermediate may stall out as it inches closer to the $55 level, Jay Hatfield, a New York-based portfolio manager at the InfraCap MLP exchange-traded fund, said by telephone. But ultimately, a move into the $55 to $60 range is more probable than a major correction.

“Inventories are in good shape,” Hatfield said. “Demand is quite positive globally. We’ve been appropriately bullish.”

See chart: U.S. benchmark crude closing in on overbought territory

The API report also showed supplies at the Cushing, Oklahoma, pipeline hub fell by 263,000 barrels last week and distillate supplies dropped by 3.11 million barrels.

The EIA’s report on Wednesday is expected to show that U.S. crude inventories fell by 1.3 million barrels last week, according to the median estimate in a Bloomberg survey.

Oil-market news:

• U.S. crude production averaged 9.2 million barrels a day during the month of August, compared with the 9.34-million average of weekly estimates, the EIA said.
• Saudi Arabia will need oil to trade at $70 next year to break even, the Washington-based International Monetary Fund said on Tuesday in its Regional Economic Outlook for the Middle East and Central Asia.
• Mexico spent about 24 billion pesos ($1.25 billion) to lock in prices for 2018 oil exports, more than 21 percent what it paid to hedge crude a year ago, according to Finance Ministry data.
• Goldman Sachs Group Inc. isn’t throwing in the towel on its commodities business just yet. The bank has hired a slate of traders from rivals to turn around that business after it suffered the worst quarterly performance in the firm’s history as a public company.

--With assistance from Heesu Lee and Grant Smith

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll, Mike Jeffers

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