Oil Extends Gains as Shrinking U.S. Stockpiles Signal Tightness

(Bloomberg) -- Oil extended gains from a two-month high on concerns over market tightness after U.S. crude inventories fell for a fifth week at a time sanctions on Iran threaten supplies.

Futures rose as much as 1 percent in New York, after settling on Wednesday at the highest level since July 10. Government data showed U.S. crude inventories fell to the lowest since February 2015 and stockpiles at the Cushing storage hub declined for a second week. The drop has been spurred by the nation’s increased oil exports, which jumped last week to the highest level since July.

The specter of American sanctions on Iran’s oil exports is haunting the market, boosting crude by about 10 percent from the lows of August despite the escalating trade tension between the U.S. and China. Saudi Arabia is said to be comfortable with Brent rising above $80 a barrel, and investors will focus on the kingdom’s statements when the Organization of Petroleum Exporting Countries and its allies meet in Algiers this weekend.

“The renewed draws at Cushing have allowed WTI to outperform and $80 level for Brent continues to act as a magnet,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “The market focus will now shift to comments out of Algiers.”

West Texas Intermediate for October delivery, which expires Thursday, gained as much as 69 cents to $71.81 a barrel on the New York Mercantile Exchange, and was at $71.46 at 10:02 a.m. in London. Prices advanced $1.27 on Wednesday. Total volume traded was about 12 percent above the 100-day average. The more active November contract added 0.4 percent.

Brent for November settlement traded at $79.37 a barrel on the ICE Futures Europe exchange, down 3 cents, after Wednesday’s 37 cents increase. The global benchmark crude traded at a $8.31 premium to WTI for the same month.

Some other key oil-market figures, news and events:

• Russia’s crude production has jumped to a new post-Soviet record as it prepares for talks with OPEC on further cooperation, according to a government official.
• Iran said it will veto any OPEC decision that harms the nation and warned that some oil producers are trying to create an alternative suppliers’ forum that supports U.S. policies hostile to the government in Tehran.
• In the U.S., nationwide stockpiles declined by 2.06 million to 394.1 million barrels last week, while those at the storage hub in Cushing, Oklahoma, slipped 1.25 million barrels to the lowest since early August, according to Energy Information Administration data on Wednesday.
• OPEC’s 60-year history has rarely confronted a more challenging period than the past decade, faced with a global recession, both $140 and $30 oil, the U.S. shale revolution, a market-share war, and output cuts.

To contact the reporters on this story: Rakteem Katakey in London at rkatakey@bloomberg.net;Heesu Lee in Seoul at hlee425@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Rakteem Katakey, Helen Robertson

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