Oil Extends Gain as Industry Report Said to Show Supply Drop

  • Libya’s NOC confirms reopening of Sharara, El Feel fields
  • OPEC deal could reduce inventories by first quarter: Citigroup

Morse: Libya Production Should Be Volatile in 2017

Oil extended a gain in New York as an industry report was said to show U.S. crude stockpiles fell last week.

February-delivery futures rose 30 cents after the American Petroleum Institute said late Tuesday that nationwide crude inventories sank 4.15 million barrels last week, according to a person familiar with the data. Libya’s National Oil Corp. said it reopened the Sharara and El-Feel fields and said they should help boost output by 175,000 barrels a day within one month and 270,000 within three months. An Energy Information Administration report on Wednesday was expected to show a 2.5 million-barrel decline, according to a Bloomberg survey.

Oil has traded near $50 a barrel since the Organization of Petroleum Exporting Countries agreed Nov. 30 to cut output for the first time in eight years. Non-OPEC producers including Russia will also trim supply. The reductions may trim swollen stockpiles as early as the first quarter, Citigroup Inc. said. U.S. crude inventories are at the highest seasonal level since the EIA began compiling weekly data in 1982. Gulf Coast refiners curb deliveries at the end of the year to reduce local taxes.

"We’re in a consolidation period," Gene McGillian, manager of market research for Tradition Energy in Stamford, Connecticut, said by telephone. "We’re going to move back and forth on headlines. Any headline that points to cheating on quotas or higher production will put downward pressure on the market."

West Texas Intermediate for February delivery traded at $53.60 a barrel at 4:50 p.m. on the New York Mercantile Exchange, after settling at $53.30. The January contract rose 11 cents to expire at $52.23 Tuesday. Total volume traded was 37 percent below the 100-day average at 3:12 p.m.

Libyan Return

Brent for February settlement rose 43 cents, or 0.8 percent, to $55.35 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.05 premium to February WTI.

Libya is also set to load its first crude cargo in two years from Es Sider oil port, its largest export terminal. A comeback by the country, which was exempted from OPEC’s planned cuts because of its internal strife, will put more pressure on OPEC and other producers that agreed to cuts. Libya, which holds Africa’s largest oil reserves is struggling to recover from years of conflict between rival governments and militias.

See also: OPEC’s oil cuts deal shifts focus to compliance

The agreement between OPEC and other producers may help send Brent prices above $70 a barrel next year, according to Ed Morse, head of commodity research at Citigroup. he says he expects production to drop by near 1 million barrels a day.

Iraq, OPEC’s second-largest oil producer, told buyers of its crude that exports will drop to meet its commitments to the organization. Among the 12 other OPEC nations, top producer Saudi Arabia, Kuwait, the United Arab Emirates and Qatar are said to have warned some customers of lower crude allocations for next month. Algeria and Gabon said they’ve told oil companies about reducing output. Angola said it will curtail production in line with its commitment.

U.S. Stockpiles

The EIA is projected to report that U.S. gasoline stockpiles increased in the week ended Dec. 16, while inventories of distillate fuel, a category that includes heating or and diesel, declined, according to the survey of analysts.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably increased by 1.9 million barrels last week, according to a forecast compiled by Bloomberg.

Oil-market news:

  • President Barack Obama is preparing to block the sale of new offshore drilling rights in much of the U.S. Arctic and parts of the Atlantic, according to two people familiar with the decision.
  • Saudi Arabia retakes position as biggest oil seller to India, according to shipping data obtained by Bloomberg.

— With assistance by Jessica Summers, and Grant Smith

    Before it's here, it's on the Bloomberg Terminal.