Oil Rises After Report Shows Large Crude-Stockpile Drop
Crude has slumped about 30 percent from a four-year high in early October.
(Bloomberg) -- Oil edged higher after a U.S. industry report signaled a bigger-than-expected draw in crude inventories last week.
Futures rose above $52 a barrel in New York. The industry-funded American Petroleum Institute was said to report U.S. crude supplies fell 10.2 million barrels last week, according to people familiar with the data. Earlier, oil settled higher on renewed optimism that announced production cuts from the OPEC+ coalition will re-balance global markets, while Libya’s biggest field remained shut, taking supply off line.
Saudi Arabia has said it plans to slash output to about 10.2 million barrels a day in January, down 900,000 a day from November. On Tuesday, Russian Energy Minister Alex Novak said his country will reduce output next month by at least 50,000 to 60,000 barrels a day, about 11,000 below November.
"The Russians committing to the cut and putting a number out, even though it was relatively small, allowed the markets to rally," said Bob Yawger, director of futures at Mizuho Securities USA. "Once the rally started, there were still lots of people still short so it flushed a lot of them out."
Crude has sunk about 30 percent from a four-year high in early October, with volatility reaching a two-year high last month. While analysts from Goldman Sachs Group Inc. to Morgan Stanley are optimistic the OPEC+ curbs will bring relief to the market, they’re concerned over the longer-term effectiveness of the pact.
That sentiment was echoed by commodity hedge fund Philipp Oil, which said in an investor letter that while Brent has found a floor of around $60 a barrel after the supply limits were announced, weaker oil demand and booming U.S. shale output will keep markets oversupplied.
West Texas Intermediate futures prices traded up to $52.11 a barrel at 4:34pm, after settling at $51.65 a barrel on the New York Mercantile Exchange, a 65 cent increase over Monday.
Brent for February delivery climbed 23 cents to settle at $60.20 a barrel on London’s ICE Futures Europe exchange. The global benchmark crude traded at an $8.36 premium to WTI for the same month.
The U.S. Energy Information Administration will issue its inventory report on Wednesday at 10:30 a.m. in New York.
Libya declared force majeure earlier this week at the Sharara oil field after an armed group forced a production halt. The shutdown will result in an output loss of 315,000 barrels a day, state producer National Oil Corp. said on its website.
U.S. equity markets and European stocks rallied earlier as investors weighed the prospects for success in American-Chinese trade talks. China is moving toward cutting its trade-war tariffs on imported U.S.-made cars, a step already brandished by Trump as a concession won during trade talks in Argentina.
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--With assistance from Sharon Cho.
To contact the reporters on this story: Catherine Ngai in New York at cngai16@bloomberg.net;Alex Longley in London at alongley@bloomberg.net
To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Catherine Traywick
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