Oil rises from six-week low as U.S. glut eases, Russia backs cuts
NEW YORK and LONDON (Bloomberg) -- Crude rebounded from a six-week low on signs the U.S. supply glut is easing and as Russia signaled support for extending output cuts with OPEC.
Futures rose as much as 1.2% in New York. U.S. crude stockpiles fell by 4.16 MMbbl last week, the American Petroleum Institute was said to report Tuesday. The API was also said to report that gasoline and distillate-fuel supplies slipped. The industry figures precede government data that will be released Wednesday, which is forecast to also show an inventory drop. Russia believes that its accord to cut production alongside OPEC and other producers should be extended, a Russian government official said.
Oil has fallen the past two weeks on concern that increasing U.S. output will offset efforts by the Organization of Petroleum Exporting Countries and its allies to eliminate a global glut. OPEC will meet again May 25 in Vienna to decide whether to extend the cuts through the second half of the year.
"After dropping to a six-week low it was time for a little covering of positions," Gene McGillian, manager of market research for Tradition Energy in Stamford, Conn., said by telephone. "The drop in crude stocks was bigger than we anticipated and the decline in fuel supplies was also supportive."
West Texas Intermediate for June delivery rose 13 cents to $47.79/bbl at 9:06 a.m. on the New York Mercantile Exchange. Futures tumbled 2.4% to $47.66 on Tuesday, the lowest since March 21. Total volume traded was about 19% below the 100-day average.
Brent for July settlement advanced 17 cents to $50.63/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.52 premium to July WTI.
U.S. crude stockpiles probably fell by 3 MMbbl in the week ended April 28, according to the median estimate in a Bloomberg survey of 11 analysts before an Energy Information Administration report on Wednesday. That would be a fourth week of declines.
Russian viewpoint
Russia considers it sensible to extend the existing deal for at least six months given current market dynamics, according to a government official with knowledge of the matter. Russia exceeded its target of cutting production by 300,000 bpd from October levels by 790 bpd on May 1, said the official who asked not to be identified as the information isn’t public.
OPEC deepened production cuts last month, with overall output dropping by 40,000 bpd, according to a Bloomberg News survey. Compliance among 10 OPEC members bound by the reduction deal strengthened to 102% from 89% in March, according to the survey of analysts, oil companies and ship-tracking data.
“The market mood, despite recent OPEC rhetoric, was bearish, and the API headline allowed oil at the end of the session to limit losses,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. The market faces “a longer re-balancing period than most had hoped for.”
