Crude markets are getting some encouragement from the U.S. as supplies fell for a sixth week — a sign that OPEC-led production curbs are starting to be felt in the world’s biggest oil-consuming nation.
Inventories fell 1.75 million barrels last week to 520.8 million, the Energy Information Administration reported Wednesday — less than the 2.67 million-barrel decline forecast by analysts surveyed by Bloomberg. Russia and Saudi Arabia said on Monday that they’re in favor of extending output cuts for nine months to give global stockpiles more time to reach the level targeted by OPEC and its allies.
“OPEC still has work to do,” Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments, said by telephone. “They ultimately want the production cuts to pull inventories down. These numbers show that slow progress is continuing.”
Russia and Saudi Arabia are the largest of the 24 producers that agreed to reduce output for six months starting in January. Ministers from the countries are scheduled to gather in Vienna on May 25 to discuss extending the curbs. Prices have slipped since reaching a 19-month high in February on speculation that surging U.S. production will undercut OPEC’s efforts.
West Texas Intermediate for June delivery increased 58 cents, or 1.2 percent, to $49.24 a barrel at 12:13 p.m. on the New York Mercantile Exchange. Prices rose as much as 1.7 percent to $49.50 after release of the EIA report. Total volume traded was about 29 percent above the 100-day average.
Brent for July settlement rose 72 cents, or 1.4 percent, to $52.37 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.78 premium to July WTI.
See also: OPEC risks deal fatigue as maintaining oil curbs gets tougher.
U.S. supplies of crude are still near records and more than 100 million barrels higher than the five-year average for this time of the year, data compiled from the EIA show. Crude production fell for the first time in 13 weeks, ending the longest stretch of gains since 2012.
Supporting Market
“It’s the first time in 13 weeks that domestic production has been lower,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “That, plus draws across the board, should help support the market. This is a good report for the Saudis.”
Gasoline supplies slipped 413,000 barrels, while inventories of distillate fuel, a category that includes diesel and heating oil, dropped 1.94 million barrels to 146.8 million, the lowest since November 2015.
Oil-market news:
Saudi Arabian Oil Co. plans to sign agreements with at least 10 companies including General Electric Co. and oil field-service businesses when President Donald Trump visits the kingdom, according to two people familiar with the matter. Libya’s Messla and Sarir oil fields restarted Wednesday, according to the Arabian Gulf Oil Co. Their combined output is expected to ramp up to 280,000 barrels a day. BP Plc, one of five oil supermajors to report bumper first-quarter profit, said it will restore production to levels reached before the disastrous Gulf of Mexico oil spill in three years.
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