Oil Settles at Six-Month High as Market Weighs Supply Balanceby
Nigeria reduces output, U.S. crude stockpiles fell last week
Canadian producers plan to bring production back online
Oil settled at the highest level in more than six months as the market weighed concern of a reduction in global crude supply with Canadian producers planning to resume oil-sands output.
Futures seesawed between gains and losses in intraday trading in New York before settling above $46 a barrel for a second day. Producers in Canada plan to resume output at some oil-sands sites after wildfires took production offline, while Nigeria said militant attacks have cut output by as much as 600,000 barrels a day. U.S. inventories dropped by 3.4 million barrels last week, government data showed Wednesday.
Canadian mines and drilling projects north of Fort McMurray are bringing back some of the roughly 1 million barrels a day of supply that was curbed amid fires, Suncor Energy Inc. Chief Executive Officer Steve Williams said Tuesday. Canadian Natural Resources Ltd. said it restored normal production rates at its Horizon oil-sands site in Alberta and Enbridge Inc. expects to restart its Athabasca crude pipeline this weekend.
“The market is looking at the Canadian oil sands while they come back to production over the next few weeks,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “It may be a month before everything is back on track.”
West Texas Intermediate for June delivery rose 47 cents to settle at $46.70 a barrel, the highest since Nov. 3, on the New York Mercantile Exchange. It earlier rose as high as $47.02 and dipped as low as $45.61 in Thursday trading. Brent for July settlement climbed 48 cents to end the session at $48.08 a barrel on the London-based ICE Futures Europe exchange.
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. Iran’s crude production has returned to pre-sanction levels as the nation ramps up output to regain market share, according to the International Energy Agency.
The global surplus in the first half of this year will probably be smaller than previously estimated because of robust demand in India and other emerging nations, the IEA said. Still, further gains in oil prices “are likely to be limited by brimming crude and products stocks,” it predicted.
U.S. crude stockpiles declined to 540 million barrels in the week ended May 6, yet still remain near the highest level since 1929, 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.
“Strong draws in gasoline, distillates and the drop-off in supplies caused a little uptick,” Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital in Miami, said by telephone. “Even with the weekly numbers that came out, we’re still seeing supply-demand imbalances. We can’t get ahead of ourselves and fool ourselves that this is a real rally that has legs.”
More oil-market news:
- Exxon Mobil Corp. is said to have had Nigeria pipeline issue on Qua Iboe crude, according to a person familiar with the matter.
- 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 EIA, said in a Bloomberg Television interview.