Futures fluctuated in New York after rising 3.5 percent so far this week. U.S. crude supplies have dropped five weeks since reaching a record level at the end of March, falling faster and earlier than the five-year average. OPEC and its allies support extending the curbs for a further six months, Iraq’s Jabbar Al-Luaibi and Algeria’s Noureddine Boutarfa said Thursday in Baghdad. The two biggest producers participating in the curbs, OPEC’s Saudi Arabia and non-member Russia, both signaled willingness on May 8 to prolong the deal.
Oil is rebounding after a bigger-than-forecast decline in American crude inventories, which are considered a lagging indicator of a rebalancing market by Goldman Sachs Group Inc. While members of the Organization of Petroleum Exporting Countries continue cuts, concerns remain about increasing output from rival producers. OPEC boosted estimates for growth in supplies outside of the group by 64 percent amid a recovery from the U.S. oil industry.
“You have to respect this rally,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “OPEC and Saudi Arabia in particular did a lot of heavy lifting this week, and appear to have succeeded in supporting prices, at least for the time being. Some people looking at the inventory declines see it as the beginning of a trend.”
West Texas Intermediate for June delivery rose 7 cents to $47.90 a barrel at 9:26 a.m. on the New York Mercantile Exchange. Total volume traded was about 20 percent above the 100-day average.
Brent for July settlement climbed 21 cents to $50.98 a barrel on the London-based ICE Futures Europe exchange. Prices are up 3.8 percent this week. The global benchmark crude traded at a $2.72 premium to July WTI.
U.S. supplies declined by 5.25 million barrels to 522.5 million last week, the biggest drop this year, Energy Information Administration data showed Wednesday. While that’s down from a record 535.5 million barrels at the end of March, output rose for a 12th week to 9.3 million barrels a day, the highest since August 2015.
“Oil inventory data indicates that the U.S. oil market has more or less rebalanced,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “The global oil market has moved into a deficit. These cuts are starting to bear fruit.”
- Saudi Arabia and Equatorial Guinea agree on extending oil output reduction deal for at least 6 months. The Saudis also support Equatorial Guinea in joining OPEC, according to Saudi Press Agency
- In OPEC’s battle to revive the global oil market, the group and its allies are digging in for a long war of attrition against shale. U.S. output will be approaching the 9.5 million barrels a day mark by the time OPEC meets in Vienna later this month.