Photographer: Kevin Lee/Bloomberg News

Oil Closes at Two-Month High as Equities Rise, OPEC Output Slips

  • Global equities climb on U.S. economic data, stimulus optimism
  • Crude supply seen rising from 86-year high in Bloomberg survey

Oil closed at a two-month high in New York as global equities rallied and OPEC crude production dropped from a record.

West Texas Intermediate crude rose 1.9 percent. Stocks advanced on optimism central banks from Asia to Europe will follow China’s in adding to stimulus, while data suggests that American consumers can power the world’s largest economy. Iraq and Nigeria led production declines in the Organization of Petroleum Exporting Countries last month, a Bloomberg survey showed.

"The market continues to push higher after China lowered reserve requirements," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We’re up on bullish expectations. There’s a feeling that either non-U.S. producers will agree to a cut or that low prices will eventually have a big effect on U.S. production."

Oil has slipped about 7 percent this year and averaged less than $32 a barrel during the past two months, the longest stretch below that level in more than 12 years. OPEC output slid by 79,000 barrels to 33.06 million barrels a day in February.

WTI for April delivery rose 65 cents to $34.40 a barrel on the New York Mercantile Exchange. It was the highest settlement since Jan. 5. Futures touched $34.76, the highest intraday level since Jan. 28. Total volume traded was 12 percent above the 100-day average at 4:38 p.m.

Futures retreated after the settlement when the American Petroleum Institute was said to report U.S. crude supplies rose 9.9 million barrels last week. WTI traded at $33.84 at 4:39 p.m.

Market Stimulus

Brent for May settlement increased 24 cents, or 0.7 percent, to $36.81 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since Jan. 4. The global benchmark crude ended the session at an 66-cent premium to May WTI.

Prices climbed after China’s central bank cut its reserve requirement ratio by 0.5 percentage points on Monday, freeing up the amount of cash the nation’s banks can lend in an effort to stimulate demand. China is the biggest crude-consuming country after the U.S.

U.S. crude stockpiles probably increased 3.4 million barrels from an 86-year high last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. The agency is projected to report that supplies of gasoline and distillate fuel, a category that includes diesel and heating oil, dropped.

Ample Inventories

"WTI is attracting a bid despite expectations for a further build in U.S. inventories," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "The price action suggests that a bottom is in place. The market move itself acts as positive reinforcement."

U.S. crude stockpiles grew to 507.6 million barrels in the week ended Feb. 19, the most since 1930, EIA data show. Supplies at Cushing, Oklahoma, the biggest U.S. oil-storage hub and delivery point for WTI traded in New York, rose to a record 65.1 million barrels during the period. 

"Inventories are going to continue to go up for a month or so, which will be a headwind for the market," said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $128 billion of assets. "It looks like we’re no longer in danger of taking a dive to the low $20s, but that doesn’t necessarily mean that we’re heading for a big rally."

  • Russia’s top oil producers met with President Vladimir Putin Tuesday to pledge their support for a plan agreed with Saudi Arabia and other producing nations to freeze output at January levels. There was no decision to cut production.
  • The oil-price collapse will compel all producers to freeze output and no early OPEC meeting can take place without such a move, the United Arab Emirates’ Energy Minister Suhail Al Mazrouei said Tuesday.
  • Marathon Oil Corp. is selling stock to shore up its finances. The producer increased its offering to 145 million shares, priced at $7.65 apiece, from 135 million, Houston-based Marathon said in a statement. The underwriters will have the option to buy an additional 21.75 million, allowing the company to raise as much as $1.28 billion.
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