Oil Rises to 15-Month High on U.S. Supply Drop, OPEC Optimism
by Jessica Summers / Bloomberg
Oil jumped to a 15-month high in New York after the government reported that U.S. crude inventories unexpectedly fell last week and Saudi Arabia’s energy minister said many nations are willing to join OPEC output cuts.
Futures rose as much as 3.3 percent to the highest since July 2015. The Energy Information Administration reported a 5.25 million-barrel decline in nationwide crude supplies to the lowest level since January in the week ended October 14. Analysts surveyed by Bloomberg had forecast a 2.1 million-barrel increase. OPEC can continue to stabilize the market and other nations have given “strong signals” they will cooperate, Saudi Arabia’s Minister of Energy and Industry Khalid Al-Falih said in London.
“It’s a big draw. It’s a bit of surprise for the market because we are also in peak turnarounds and that’s what makes it so impressive,” Amrita Sen, chief oil economist for Energy Aspects Ltd. in London, said by telephone. “If then, on top of this, the OPEC cuts do materialize, our view is that we can see $60 by year end this year. A lot depends on what happens between now and November 30.”
Oil has fluctuated near $50 a barrel amid uncertainty about whether the Organization of Petroleum Exporting Countries will be able to implement an accord to reduce supply when they gather at an official meeting in November. An OPEC committee will meet later this month to try to resolve differences over how much individual members should pump. OPEC will start with an output freeze, or possibly a small cut, Al-Falih said.
“Any indication of a deal will add fuel to the bulls’ fire,” Tamas Varga, an analyst at PVM Oil Associates, said by phone. “I don’t think it’s going to last for a long time, but at the moment the trend is up.”
West Texas Intermediate for November delivery rose $1.44 to $51.73 a barrel at 11:15 a.m. on the New York Mercantile Exchange. The more-active December contract climbed $1.39 to $52.01 a barrel. Brent for December settlement rose $1.24 to $52.92 a barrel on the London-based ICE Futures Europe Exchange.
Crude supplies in Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, fell 1.64 million barrels to 59.7 million barrels, the lowest supply level since December, the EIA said. U.S. average weekly crude imports slid to 6.91 million barrels a day, the lowest level since June 2015. The American Petroleum Institute was said to report Tuesday a 3.8 million-barrel drop for nationwide inventories.
- Exxon Mobil Corp. Chief Executive Officer Rex Tillerson says ample production from U.S. shale regions will keep prices subdued for years to come, disagreeing with others in the industry who have warned about a looming shortage.
- Saudi Arabia told investors how much it’s willing to pay on its debut international bond to help finance a budget deficit that ballooned to the widest in more than two decades as oil prices collapsed, according to people familiar with the matter.
- There is no possibility Russia will pull out of an agreement to cut production, OPEC Secretary-General Mohammed Barkindo told reporters at a conference in London. Barkindo will meet Russian Energy Minister Alexander Novak on Monday.