Oil Climbs Near $50 After U.S. Stockpiles Decline for Fifth Week

  • Crude supplies fell by 2.98 million barrels last week: EIA
  • Oil imports, production slipped as refinery operations slowed

Goldman's Currie Sees 2017 Oil Market 'Very Oversupplied'

Oil climbed, approaching $50 a barrel in New York, after government data showed that U.S. crude stockpiles dropped last week.

Inventories slipped 2.98 million barrels in the week ended Sept. 30, according to the Energy Information Administration. That contrasts with the 1.5 million barrel increase forecast by analysts surveyed by Bloomberg and a 7.6 million decrease reported Tuesday by the industry-funded American Petroleum Institute. Production and imports slipped for a second week as refineries idled units for seasonal maintenance.

"This is the fifth-straight weekly decline in crude supplies, which is very supportive," said Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston. "It’s good to see crude supplies come off, especially given how high they’ve been recently."

Oil has advanced more than 10 percent since the Organization of Petroleum Exporting Countries agreed last week to cut production for the first time in eight years. OPEC, which pumped at a record in September, will decide on quotas for the group’s members at an official meeting in Vienna on Nov. 30. Hurricane Matthew is heading for the U.S. and may disrupt East Coast fuel shipments.

West Texas Intermediate for November delivery rose $1.14, or 2.3 percent, to $49.83 a barrel on the New York Mercantile Exchange. It was the highest close since June 29. Prices reached $49.97 earlier. Total volume traded was 13 percent above the 100-day average at 2:38 p.m.

Ample Stockpiles

Brent for December settlement increased 99 cents, or 1.9 percent, to $51.86 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since June 9. The global benchmark ended the session at a $1.48 premium to WTI for December delivery.

"We closed just short of $50 and are still on track for a retest of the June peak," said Walter Zimmerman, chief technical strategist for United-ICAP in Jersey City, New Jersey. 

U.S. crude supplies fell to 499.7 million in the week ended Sept. 30, the lowest level since January, according to EIA data. Inventories reached 543.4 million barrels in the week ended April 29, the highest since 1929. Stockpiles remain at the highest seasonal level in more than 20 years.

Crude imports slipped by 1.6 percent to 7.71 million barrels a day last week. Production decreased 0.4 percent to 8.47 million barrels a day.

Refinery Maintenance

Refineries cut operating rates by 1.8 percentage point to 88.3 percent of capacity, the lowest level since April. Plants usually cut back on operations in September and October after the peak-demand driving season comes to an end.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, dropped 2.36 million barrels, the biggest decline since May. Gasoline supplies rose 222,000 barrels to 227.4 million.

Diesel futures for November delivery advanced 1.8 percent to $1.5823 a gallon, the highest close since Oct. 9, 2015. November gasoline slipped 0.5 percent to $1.4928 a gallon.

"These are bullish numbers," said Kyle Cooper, director of research with IAF Advisors in Houston. "Inventories have dropped more than 10 million barrels in the last couple weeks, which is giving the bulls ammunition. That with OPEC at least starting to talk about cooperating is making it hard to be short."

An agreement among OPEC and non-OPEC states to limit oil production could slash global supply by 1.2 million barrels a day and add as much as $15 to prices, said Venezuelan Oil Minister Eulogio Del Pino. OPEC would collectively cut output by 700,000 barrels a day under the accord hashed out last week in Algiers, while non-OPEC states would reduce production by another 500,000 barrels a day, he said in an e-mailed statement Tuesday.

Oil-market news:

  • Saudi Arabia cut pricing for November oil sales to Asia and Northwest Europe and for most grades to other regions amid a global supply glut.
  • National Iranian Oil Co. will supply BP Plc with natural gas condensate for the first time since sanctions were lifted in January, according to an NIOC official, asking not to be identified because of internal policy.
  • Oil will struggle to rise above $55 a barrel as shale producers are able to hedge output at this level, Jeff Currie, head of commodities research at Goldman Sachs Group Inc., said in a Bloomberg television interview.
  • Encana Corp., one of Canada’s largest energy explorers, is increasing capital spending by as much as 64 percent as it seeks to pull more crude out of the Permian Basin, America’s most prolific oil field.
    Before it's here, it's on the Bloomberg Terminal.