Oil extended gains in its longest rally since the end of December on increasing confidence that Opec’s supply curbs will outweigh a gain in US crude stockpiles.
Futures in London added as much as 0.6 percent, after gaining 1.8 percent over the past three sessions. The Organization of Petroleum Exporting Countries is confident members will continue to cut production and reduce global stockpiles, Secretary-General Mohammad Barkindo said. While US inventories probably expanded last week, they are seen shrinking once some of the nation’s refineries resume operations next month after maintenance.
A surge in US crude stockpiles to the highest level in more than three decades at a time when Opec and 11 other nations are trimming supply to ease a global glut has kept oil futures in a tight range above $50 a barrel this year. But with the exporters group implementing about 90 percent of the pledged cuts last month and Goldman Sachs Group Inc. predicting the market will shift into deficit in the first half of this year, investors are turning more confident.
“Even if the US output recovers, there is still room for oil to rise as shale producers won’t be able to offset Opec’s output cuts as long as the accord is in place,” said Min Byungkyu, a global market strategist at Yuanta Securities Korea Co. in Seoul. “The market is less concerned about the rise in US stockpiles because it’s low-demand season and once refineries boost output from March, inventories will shrink.”
Brent for April settlement rose as much as 35 cents to $57.01 a barrel on the London-based ICE Futures Europe exchange, and was up 0.3 percent at $56.85 by 7:25 a.m. London time. The contract advanced 48 cents, or 0.9 percent, to $56.66 on Tuesday. Front-month futures are set for their fourth day of gains, the longest rally since Dec. 28.
West Texas Intermediate for April delivery was at $54.43 a barrel on the New York Mercantile Exchange, up 10 cents. Total volume traded was about 50 percent below the 100-day average. The March contract expired Tuesday after advancing 66 cents to $54.06, the highest since Dec. 28. The US benchmark crude traded at a discount of $2.41 to global benchmark Brent.
It’s premature to say whether Opec would need to extend the agreement beyond its initial term of six months, or even to deepen the cuts, Barkindo said. The pace of the decline in global oil stockpiles, which Opec wants to see fall back in line with the five-year average, will determine the group’s next move, according to Barkindo.
US stockpiles probably rose by 3.5 million barrels last week, according to analysts surveyed by Bloomberg before a government report Thursday. Nationwide inventories have increased by about 40 million barrels since the start of the year.
Rosneft PJSC, the state-run producer headed by a close adviser of Russian President Vladimir Putin, is expanding its footprint in the Middle East by striking new oil deals with Iraq’s Kurdish region and Libya. ConocoPhillips said proved reserves of oil and natural gas tumbled 21 percent to a 15-year low as weak energy prices made some oil-sands assets in western Canada unprofitable.