Oil Extends Gain Above $62 as U.S. Crude Supply Glut Seen Easing
Wednesday, 06 May 2015 | 11:55
Oil extended its advance to trade above $62 a barrel on signs the U.S. supply glut is easing.
Futures gained as much as 2.7 percent in New York, rising from the highest close since December. Crude inventories fell by 1.5 million barrels through May 1, the first drop in industry data in eight weeks, the American Petroleum Institute was said to have reported Tuesday. An increase of 1.5 million is forecast in a Bloomberg survey before a separate government report Wednesday. The dollar declined against the euro and other currencies, increasing the appeal for commodities priced in the U.S. currency.
Oil is recovering from a six-year low in March as U.S. companies reduced the number of active rigs to the fewest since September 2010, bolstering speculation that output will slow. The rally may still falter, with crude stockpiles at the highest level in 85 years and shale-oil producers including EOG Resources Inc. preparing to boost drilling as prices rebound.
“Rig counts at half of what they were six months ago should start to rebalance the supply demand economics,” Michael Hewson, London-based senior market analyst at CMC Markets Plc, said by phone. “The weaker dollar and the supply glut easing have been the factors driving the rally in the last few weeks and they are still in play.”
West Texas Intermediate for June delivery climbed as much as $1.65 to $62.05 a barrel in electronic trading on the New York Mercantile Exchange and was at $62.03 at 9:45 a.m. London time. The contract advanced $1.47 to $60.40 on Tuesday, the highest close since Dec. 10. The volume of all futures traded was 11 percent above the 100-day average for the time of day. Prices have gained 16 percent this year.
Brent for June settlement rose as much as $1.62, or 2.4 percent, to $69.14 a barrel on the London-based ICE Futures Europe exchange. It climbed $1.07 to $67.52 on Tuesday, the highest close since Dec. 5. The European benchmark crude traded at a premium of $7.06 to WTI.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major peers, fell 0.2 percent Wednesday.
Crude inventories in the U.S., the world’s largest oil consumer, have expanded for 16 weeks through April 24 to 490.9 million barrels, data from the Energy Information Administration show. That’s the highest level since 1930, based on monthly records from the Energy Department’s statistical arm dating back to 1920.
Supplies at Cushing, Oklahoma, the delivery point for WTI contracts and the nation’s biggest oil-storage hub, declined by 336,000 barrels last week, the API in Washington reported, according to ForexLive.
The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that data be filed with the EIA for its weekly survey.
EOG will increase drilling as soon as the market stabilizes at $65 a barrel, Chairman and Chief Executive Officer William Thomas said Tuesday. Pioneer Natural Resources Co. plans to add drilling rigs from July, subject to oil-price movements and the sale of assets.
Drillers seeking oil in the U.S. cut the number of active machines by 24 to 679 in the week ended May 1, according to Baker Hughes Inc., an oil-services company. The rig count has slid 57 percent since the start of December.
“The market remains oversupplied with crude -- it’s gotten ahead of itself,” said Victor Shum, a Singapore-based vice president at IHS Inc., an energy consultant. “The mood is that demand looks to be quite healthy and many people are counting on crude-supply growth in the U.S. to be reduced in the latter half of this year.”
Saudi Arabia, the world’s largest crude exporter, kept the discount on its main Arab Light grade unchanged for June sales to Asia, state-owned Saudi Arabian Oil Co. said in a statement Tuesday. It raised pricing levels on all grades shipped to Europe and most to the U.S.
The 14-day relative strength index for both WTI and Brent have climbed to more than 70, the highest readings since June, data compiled by Bloomberg showed. Investors typically sell contracts above that level as it indicates a market has risen too quickly to sustain further gains.