Oil Advances as U.S. Crude Inventories Projected to Decline

  • Supply seen down 2 million barrels last week: Bloomberg survey
  • Cool weather helping to contain fires around Canada oil sands

Here's Why This Oil Market Is Different

Oil climbed before the release of U.S. government data that is forecast to show crude inventories declined, easing a glut.

Futures rose 1.1 percent in New York. U.S. crude stockpiles, which are near an eight-decade high, probably slid by 2 million barrels last week, according to a Bloomberg survey before Energy Information Administration data Wednesday. The industry-funded American Petroleum Institute released its report Tuesday. Disruptions have curbed output from Canada, Nigeria and Libya over the past month.

"We’re expecting some bullish crude-stock draws," said Michael Wittner, the New York-based head of oil-market research at Societe Generale SA. "The near-term focus is on the outages. Supply disruptions are the primary driver."

U.S. oil futures have surged more than 80 percent from a 12-year low earlier this year on signs the global glut will ease amid declining output in Nigeria and non-OPEC countries including in the U.S. The Organization of Petroleum Exporting Countries is unlikely to set an output target when it meets June 2 as it sticks with Saudi Arabia’s strategy of squeezing out rivals, according to all but one of 27 analysts surveyed by Bloomberg.

West Texas Intermediate for July delivery rose 54 cents to settle at $48.62 a barrel on the New York Mercantile Exchange. The total volume traded was 29 percent below the 100-day average.

Futures climbed from the settlement after the API was said to report U.S. crude supplies slipped 5.14 million barrels last week. WTI traded at $49.18 at 4:36 p.m in New York.

Crude Stockpiles

Brent for July settlement increased 26 cents, or 0.5 percent, to $48.61 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at an 1-cent discount to WTI.

Crude inventories at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably decreased by 500,000 barrels last week, according to the Bloomberg survey. Nationwide stockpiles rose to 541.3 million barrels in the week ended May 13, near the highest level since October 1929.

"Anticipation of the API/EIA reports and continuing discussions about disruptions in Nigeria, Canada and elsewhere are supporting prices," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "The majority of people are looking for a draw of 1 or 2 million barrels, although I’m not one of them, because I think you’ll see that there was a big gain in imports."

Falling Output

Crude production is falling in the U.S., Mexico, Venezuela and North Sea, Falah Al-Amri, chairman of Iraq’s State Oil Marketing Organization, said at the Iraq Petroleum Conference in London. About 150,000 barrels a day of production at Kirkuk in northern Iraq is down, according to Al-Amri. Prices will move “a little bit” higher as shortages emerge, he said.

In Alberta, all of the oil-sands facilities that workers fled last week as a wildfire spread are being allowed to prepare for restart as cool, humid weather has helped contain the inferno. The province lifted mandatory evacuation orders for the last of the accommodation and production sites on Monday.

"Surplus accumulation has really slowed," said Sarah Emerson, managing director of ESAI Energy Inc., a consulting company in Wakefield, Massachusetts. "We were already projecting a deficit in the second-half of the year and now there will be less on hand as we move into it."

French Refineries

Every oil refinery in France was suffering disruptions or outright shutdowns amid a worsening labor dispute that already caused fuel shortages across the nation. All eight of the nation’s refineries were affected by strikes as workers at Exxon Mobil Corp.’s Gravenchon plant in northern France began taking steps to shut down, following similar action by staff at Total SA facilities across the country, said Emmanuel Lepine, a CGT union representative.

"The strike is going to have an impact here," Wittner said. "At some point they will have to increase imports to replenish fuel stockpiles."

U.S. stockpiles of gasoline and distillate fuel, a category that include diesel and heating oil, declined last week, according to the survey.

Gasoline futures for June delivery advanced 0.5 percent to $1.6544 a gallon, the highest settlement since August. June diesel rose 0.8 percent to $1.4887.

Oil-market news:

  • Output from Libya’s Arabian Gulf Oil Co. will rise to as much as 370,000 barrels a day in two months after the installation of power plants at oil fields, according to a spokesman.
  • Shell Chief Executive Officer Ben Van Beurden said security in Nigeria is deteriorating and the company’s local venture faces “very challenging social, economic conditions.”
  • The commodities market has turned a corner and prices are unlikely to return to lows seen in the first quarter, according to Citigroup Inc., which boosted forecasts from metals to grains amid an oil-led recovery.
Before it's here, it's on the Bloomberg Terminal.