- All eyes are on U.S. oil stockpiles report set for Wednesday
Russia, Saudis show unity on output accord propping up prices
Crude gained steam amid signs that dwindling U.S. stockpiles are contributing to a tightening global market.
Futures in New York jumped as much as 1.3 percent. Crude inventories held in terminals and tanks last week probably fell for a 10th week, the longest stretch of declines in at least three decades. Underpinning the price rally were assurances from Russian and Saudi Arabian oil chiefs that a historic production accord by the world’s largest producers will endure.
“You are seeing a rebalancing of the oil market,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “We’ve had outsized inventory declines for the last little while.”
Prices are climbing toward $65 a barrel in New York and $70 in London as the Organization of Petroleum Exporting Countries and allied producers curb output for a second straight year. Refiners and exporters in the U.S. have turned to storage to acquire supplies, accelerating the reduction of the global glut.
BBL Commodities LP, one of the world’s largest oil-focused hedge funds, believes Brent futures, the London-traded benchmark for more than half the world’s crude, will climb to $80 this year as stockpiles drop rapidly on the back of OPEC’s cuts.
West Texas Intermediate for March advanced 65 cents to $64.22 a barrel at 10:09 a.m. on the New York Mercantile Exchange. Total volume traded was about 7 percent below the 100-day average. The February WTI contract expired Monday.
Brent for March settlement surged 73 cents to $69.76 on the London-based ICE Futures Europe exchange after gaining 0.6 percent on Monday. The global benchmark crude traded at a premium of $5.54 to WTI.
U.S. crude inventories probably fell by 2 million barrels last week, according to a Bloomberg survey of analysts. Stockpiles are sitting at the lowest level since February 2015, while oil production ticked higher in last week’s government report.
Inventory figures will be released by the Energy Information Administration on Wednesday, while tallies from the industry-funded American Petroleum Institute will be released later Tuesday.
Libya’s Sara oil fields were said to increase output to 50,000 barrels a day after resuming pumping on Sunday, according to a person familiar with the situation.
The International Energy Agency probably will make an upward revision to its U.S. production outlook and a downward shift in its Venezuelan supply forecast, Executive Director Fatih Birol said in an interview in Davos.
OPEC is more focused on the price of oil and short-term revenues rather than curbing inventories to their five-year average, Citigroup analysts wrote in a report.
— With assistance by Alex Longley