At $56 Per Barrel, Crude Oil Set for Highest Gain Since 2004

Brent daily chart

Oil prices rallied Wednesday as official data showed that US gasoline stockpiles fell to a 22-month low.

The amount of oil in USA storage tanks grew by 4.6 million barrels last week, a larger build than expected, the Energy Department said Wednesday.

Oil prices rose yesterday after Iraq's oil minister said Opec and other crude producers were considering extending or even deepening a supply cut to curb a global glut, while a report showed a smaller-than-expected increase in United States inventories.

OPEC, led by Saudi Arabia, and other non-OPEC members such as Russian Federation pledged they will decrease their output to by 1.8 million barrels per day in 2017 up to next year.

In its September report, the IEA revised upwards its estimated demand growth for 2017 to 1.6m barrels per day, as Brent crude oil has averaged just above $50 a barrel through the first eight months of this year.

U.S. West Texas Intermediate (WTI) crude futures were up 33 cents, or 0.6 percent, at $49.78 a barrel at 0644 GMT.


"An improving macro-economic backdrop should spur oil demand growth over the next couple of quarters and if OPEC increases its adherence to production cuts, higher prices will come", ANZ Research said in a note, as carried by Reuters. Near 2:00pm EST, prices had climbed even further, with WTI up 2.16% at $50.55, and Brent up 2.14% at 56.32, as investors enjoyed a lower-than anticipated build in crude oil inventories. The S&P Global Platts survey forecasts a fall of 800,000 barrels for gasoline and a 1 million-barrel draw for distillates.

Despite that advance, the futures haven't closed above the key psychological barrier of $50 since late July as booming output from American shale fields countered output cuts by the Organization of Petroleum Exporting Countries and its allies. "The report shows that we're recovering from the hurricane", Rob Haworth, who helps oversee $142 billion at U.S. Bank Wealth Management in Seattle, said by telephone. Distillate inventories, which include heating oil and diesel fuel, were seen falling 1.6 million barrels last week, the poll showed.

"Exempt members Libya and Nigeria may be bought into the fold of the production cut deal".

The deal was extended in May through March 2018, but has been hindered by both a lack of compliance by some signatories and steady U.S. shale output.

Elsewhere, gasoline futures gained slipped 0.26% to $1.643 a gallon, while natural gas futures fell 0.36% to $3.083 per million British thermal units.

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