West Texas Intermediate crude climbed to the highest level in a week amid speculation that U.S. fuel demand is increasing and the Federal Reserve may signal that interest rates will stay low. Brent gained to a two-week high in London.
Futures climbed as much as 1.6 percent in New York. U.S. gasoline inventories probably dropped for a third week last week, according to a Bloomberg survey before Energy Information Administration figures today. The Federal Reserve’s Federal Open Market Committee will release a statement today at the end of a two-day meeting. As much as 50 percent of so-called tight oil output is at risk at current price levels, OPEC Secretary-General Abdalla El-Badri said today in London.
“There’s some optimism ahead of the EIA data and the market expects the Fed will remain dovish,” Kash Kamal, an analyst at Sucden Financial in London, said by phone.
WTI for December delivery rose as much as $1.30 to $82.72 a barrel in electronic trading on the New York Mercantile Exchange, the highest since Oct. 22. The contract was at $82.42 at 12:53 p.m. London time. The volume of all futures traded was 9 percent below the 100-day average for the time of day. Prices have decreased 16 percent this year.
Brent for December settlement gained as much as $1.71, or 2 percent, to $87.74 a barrel on the London-based ICE Futures Europe exchange, the highest since Oct. 14. The European benchmark crude traded at a premium of $4.83 to WTI.
WTI is recouping losses within a bear market, having slid more than 20 percent from a recent peak amid expanding global supplies. Futures are down about 10 percent in October, set for the largest monthly drop since May 2012.
Producers of tight oil from shale rock formations will be hurt by the fall in crude prices before OPEC members, El-Badri said today at the Oil & Money conference in London. The Organization of Petroleum Exporting Countries isn’t in a “critical situation.”
“If prices stay at $85, we will see a lot of investment, a lot of projects, a lot of oil going out of the market,” El-Badri said.
OPEC is currently producing about 30 million barrels a day, according to El-Badri. The group, which meets Nov. 27 in Vienna, will need to pump from 29 million to 30 million barrels next year to meet demand, he said.
OPEC’s current target of 30 million barrels a day has been in place since January 2012.
U.S. crude inventories are forecast to have increased by 3.65 million barrels in the week ended Oct. 24, according to the median estimate in the Bloomberg survey of 10 analysts. Stockpiles rose by 3.2 million, the API reported yesterday, Live Squawk said on Twitter.
Distillate supplies, including heating oil and diesel, probably fell by 1.4 million barrels last week, the survey showed. The Washington-based API was said to have reported a drop of 3 million.
Gasoline stockpiles probably fell by 900,000 barrels to 203.5 million last week, the Bloomberg survey showed.
“We are looking at a very oversupplied market unless OPEC removes barrels,” Torbjoern Kjus, an analyst at DNB in Oslo who forecasts Brent will average $80 a barrel next year, said by phone.
The API collects information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that data be filed with the EIA, the Energy Department’s statistical arm.
The Fed’s statement is scheduled for 2 p.m. in Washington. There’s only a 50 percent chance the Fed will raise its interest-rate target to at least 0.5 percent by October next year, after ending its bond-buying program today and leaving its key rate near zero, futures data and analyst forecasts compiled by Bloomberg show.