Oil advanced to its highest intraday level in six months as supply reductions around the world, from the US and Canada to Nigeria, helped whittle away the global surplus.
Futures gained 1.2 percent in New York after climbing 6.4 percent the previous two sessions. US inventories dropped by 3.4 million barrels last week, government data showed Wednesday. Nigeria said militants have curbed the country’s oil output by about 30 percent. The global surplus in the first half of this year is smaller than previously estimated because of robust demand in India and other emerging nations, the International Energy Agency said.
“The latest figures shout bullish and paint a much tighter market than a month ago,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. With “supply disruptions in West Africa sending Nigeria’s oil production to a 20-year low,” all “that was needed for oil bulls to have a field day was an unexpected draw in US oil inventories. That’s what they got.”
Oil has rebounded after slumping to the lowest level since 2003 earlier this year on signs the global oversupply is easing as U.S. output declines. While a deteriorating security situation has curbed Nigerian supply, gains from Iran and Iraq have helped to boost Organization of Petroleum Exporting Countries production to about 33 million barrels a day.
West Texas Intermediate for June delivery climbed as much as 69 cents, or 1.5 percent, to $46.92 a barrel, the highest since Nov. 4 on the New York Mercantile Exchange. The contract was at $46.78 at 1:09 p.m. London time. Total volume traded was about 26 percent above the 100-day average. Prices have gained more than 70 percent since a February low.
Brent for July settlement was 36 cents higher at $47.96 a barrel on the London-based ICE Futures Europe exchange after rising 9.1 percent the previous two sessions. The contract climbed $2.08 to $47.60 on Wednesday. The global benchmark crude was at a 44-cent premium to July WTI.
The IEA estimates global supply will exceed demand by an average of 1.3 million barrels a day in the first six months of the year — down from the 1.5 million it projected a month ago — following surprisingly strong consumption in the first quarter, the agency said in its monthly oil market report. Still, further gains in oil prices “are likely to be limited by brimming crude and products stocks,” it predicted.
Inventories at Cushing, the delivery point for WTI, expanded by 1.5 million barrels to a record 67.8 million, according to a report Wednesday from the Energy Information Administration. Production slid for a ninth week to 8.8 million barrels a day, the lowest since September 2014.
Oil-market news:
Nigeria’s production has been reduced by 600,000 barrels a day to 1.4 million a day by a resurgence in militant attacks, Minister of State for Petroleum Emmanuel Kachikwu said. Canadian oil-sands producers are starting the process of resuming operations representing more than 90 percent of output taken offline because of wildfires.
Saudi Arabia’s indication that it doesn’t want to give up market share hints at more oil coming from OPEC countries in the “short run,” Adam Sieminski, administrator of the Energy Information Administration, said in a Bloomberg Television interview.
Russia sees no reason to change its 2016 forecast of crude output at about 10.8 million barrels a day, or slightly higher, with prices at $40 to $50 a barrel, Russian Energy Minister Alexander Novak told reporters in Mogilev, Belarus.
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