Oil rose above $49 a barrel for the first time since early June after deep declines in US inventories signaled the market is shaping up.
US crude inventories declined by 7.21 million barrels last week to the lowest level since early January, according to the Energy Information Administration. Kuwait joined the U.A.E. in promising to pump less oil after Saudi Arabia called on OPEC producers to cut more supply.
“It’s been a bullish week certainly, data-wise,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “This market really has a lot going for it at the moment. There is an impression that we’re coming into balance finally and it’s driven by this pretty steep decline in U.S. crude oil inventories.”
Oil inched closer to $50 a barrel after lingering below the key level since late May in New York amid concerns that cuts by the Organization of Petroleum Exporting Countries and its allies including Russia will be offset by rising production from other countries. Saudi Arabia promised deep cuts to crude exports in August and the latest earnings results show some of the world’s biggest oil companies are leaving the worst downturn in a generation behind.
West Texas Intermediate crude for September delivery rose 17 cents to $48.92 a barrel at 11:53 a.m. on the New York Mercantile Exchange. Total volume traded was about 29 percent above the 100-day average. Prices gained 86 cents to $48.75 on Wednesday, the highest closing level since May 30. The U.S. benchmark rose closer toward its 200-day moving average of about $49.42 a barrel.
Brent for September settlement climbed 31 cents to $51.28 a barrel on the London-based ICE Futures Europe exchange. Prices gained 1.5 percent to $50.97 on Wednesday. The global benchmark traded at a premium of $2.37 to WTI.
U.S. crude inventories fell to 483.4 million barrels and gasoline stockpiles slid to the lowest level since December last week. Supplies at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, also slipped for a 10th week, EIA data showed. While nationwide crude production declined for the first time in four weeks, output from the lower-48 states jumped for a fourth week to the highest level since July 2015.
The market is digesting “very strong draws in inventories across the board. We’ve also seen comments out of Saudi Arabia supporting prices in the form of export reduction,” Adam Wise, who runs a $8 billion oil and natural gas bond and private equity portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. “Sentiment is finally being forced to pay attention to the fundamentals.”
OPEC shipments will increase to 24.14 million barrels a day in the four weeks to August 12 versus the period to July 15, tanker-tracker Oil Movements said in a weekly report. Oil products have led draws in global inventories this month, Energy Aspects Ltd. said in a report TransCanada Corp. launched an open season seeking additional binding commitments to transport crude on Keystone Pipeline and Keystone XL project to Cushing, Oklahoma and the U.S. Gulf Coast from Hardisty, Alberta.
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