Oil capped its third weekly gain after the International Energy Agency said production cuts have brought world markets “very close to balance” and should soon deplete stockpiles that rose in the first quarter.
Futures gained 1.7 per cent for the week as the agency said that, despite OPEC’s near-perfect implementation of the curbs it agreed to with Russia and other allies, stockpiles edged higher because of supply increases the countries made before the deal took effect on January 1. Total US petroleum stockpiles declined last week while crude output climbed to the highest in more than a year, according to government data earlier this week.
Brent for June settlement climbed 3 cents to $US55.89 a barrel on the London-based ICE Futures Europe exchange.Trading in New York and London will be closed for the Good Friday holiday. Photo: Daniel Acker
Oil had rallied above $US53 a barrel after some members of the Organisation of Petroleum Exporting Countries voiced support for prolonging production cuts with other nations beyond June. While US crude stockpiles declined from a record last week, OPEC said in a report on Wednesday that rivals in the American shale industry are growing stronger.
“We’re at a bit of a crossroads here,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “The IEA said that global inventories are on the cusp of declining. At the same time, they may have underestimated the growth of US production.”
West Texas Intermediate for May delivery rose 7 cents to settle at $US53.18 a barrel on the New York Mercantile Exchange. Total volume traded was about 3.3 per cent below the 100-day average.
Brent for June settlement climbed 3 cents to $US55.89 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $US2.29 premium to June WTI. Trading in New York and London will be closed for the Good Friday holiday.
Oil inventories in the 35-nation Organisation for Economic Cooperation and Development increased by 38.5 million barrels in the first quarter to about 3 billion barrels, offsetting the decline in emerging economies, according to the IEA. The agency trimmed forecasts for global demand this year by about 100,000 barrels a day to 1.3 million a day.
Saudi Arabia, OPEC’s biggest producer, is said to favour extending the supply curbs when the group meets next month, in line with the views of fellow members such as Kuwait and Venezuela. While such a decision would reduce oil inventories and support prices, it would “offer further encouragement to the US shale sector and other producers”, the IEA said.
US crude output rose by 36,000 barrels a day to 9.24 million barrels a day last week, the Energy Information Administration reported on Wednesday. That’s the highest since January 2016. Rigs targeting oil in the US rose to 683 this week, the highest level since April 2015, according to this week’s Baker Hughes data.
“We’re struggling with issues of increased production out of the US,” Nigeria’s Minister of State for Petroleum Resources Emmanuel Kachikwu said overnight.
Crude stockpiles dropped from the highest since the EIA began tracking the data in 1982 — the second decline this year. Gasoline and distillate-fuel supplies also declined last week.
- China’s crude imports in March surged to a record, making it the world’s biggest importer. Arrivals rose to 9.21 million barrels a day, Bloomberg calculations based on customs data show.
- OPEC members Iraq and the United Arab Emirates are putting pressure on a decision to extend curbs by pumping more than they agreed under the pact, while others such as Saudi Arabia produce within their quotas.
- Libya’s Wafa oil field resumed output two weeks after closing, allowing the country to lift force majeure at pipelines connected to one of its export terminals.
- Russia’s pact with OPEC to cut oil production hasn’t delivered the price gain the country expected, but it did boost February government revenue to levels not seen in almost two years.