Oil Climbs as Industry Tally Said to Show Massive Withdrawal

(Bloomberg) -- Crude rose after an industry report was said to disclose the largest-ever withdrawal of oil from the biggest U.S. storage complex.

Futures added to Wednesday’s 0.4 percent advance after the American Petroleum Institute was said to have reported stockpiles at the pipeline hub in Cushing, Oklahoma, fell by 3.94 million barrels last week. That would be the most significant draw on record if a government report confirms it on Thursday. The report was also said to show that crude inventories nationwide slid by 5.12 million barrels, exceeding the 3.15 million decline forecast by analysts in a Bloomberg survey.

“I am sure the market will take it as bullish, but there’s going to be a lot of caution” until the Energy Information Administration releases its weekly numbers, Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. “What we’re seeing is there is a lot of demand” for American crude abroad.

Prices advanced Tuesday as strict adherence by OPEC, Russia and other major producers to self-imposed supply limits overrode concerns that hedge fund managers may begin unwinding a record level of bullish bets on crude prices.

The Organization of Petroleum Countries and allied crude producers complied with their output limits at a rate of 125 percent in December, up from 122 percent a month earlier. Discipline within the group should remain high this year, Kuwaiti Oil Minister Bakheet Al-Rashidi told reporters in Kuwait City. Citgroup Inc. said the cartel and its allies have already achieved their supply goals.

“The market continues to take support from signs that OPEC and Russia’s compliance with their production cuts is really high and it doesn’t seem that there are any worries that there is cheating going on yet,” Gene McGillian, a market research manager at Tradition Energy in Stamford, Connecticut, said by telephone.

West Texas Intermediate for February delivery traded at $64.05 a barrel at 4:47 p.m. after settling at $63.97 a barrel on the New York Mercantile Exchange.

Brent for March settlement added 23 cents to end the session at $69.38 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.46 to March WTI.

Oman Meeting

Gasoline futures rose 1.1 percent to settle at $1.8584 a gallon, the highest level since August 31.

The OPEC-led group won’t be discussing how to end output cuts when they meet this weekend in Oman despite the recent run-up in crude prices, Al-Rashidi said. “There is no plan at all to talk about any exit strategy,” he said. “We are committed until the end of the year, this is the agreement.”

“WTI is continuing to outperform Brent as the reductions at Cushing have been really pronounced,” Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida, said by telephone.

The API report was also said to show that gasoline stockpiles climbed by 1.78 million barrels last week, while distillate supplies edged up by 609,000.

Arctic Blast

Meanwhile, a blast of Arctic air pushing deep into the U.S. South hindered refinery operations in the region, sent natural gas prices soaring and drove electricity demand in Texas to a record high. Marathon Petroleum Corp.’s refinery in Garyville, Louisiana, had a power outage early Wednesday and is working to restore normal operations. The units are said to be on circulation, where hot fluids are flowing through the equipment but no fuels are being produces, according to a person familiar with operations.

Oil-market news:

• Crude production from OPEC members dropped to 32.416 million barrels a day in December according to preliminary estimates compiled from independent sources, said people familiar with the matter.
• Algeria’s state-run energy producer Sonatrach signed an agreement with oil-trading Vitol Group to ship crude to Italy to be processed and sent back as refined products, the first deal of its kind to trim the country’s $2 billion annual bill for imported fuel.

--With assistance from Ben Sharples 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

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