Oil up near $50 on bets for large U.S. crude drawdown
Oil prices were up more than 1 percent on Wednesday, with market bulls targeting $50 a barrel and beyond, on expectations the U.S. government will report a large crude stockpiles drawdown for last week.
The American Petroleum Institute (API), a trade group, said on Tuesday that U.S. crude inventories fell by 5.1 million barrels in the week to May 20, twice what analysts expected in a Reuters poll. [API/S] [EIA/S]
The U.S. Energy Information Administration will issue official stockpiles data at 10:30 a.m. EDT (1430 GMT).
Wildfires in Canada’s oil sands region, as well as a near economic meltdown in OPEC member Venezuela and a spate of violent attacks against the Libya and Nigerian energy industries have cut nearly 4 million barrels per day in global crude flows, Reuters data on supply outages show.
The shortfall has accelerated the recovery in oil prices, which are up nearly 90 percent from winter lows of around $27 for Brent crude and about $26 for the U.S. West Texas Intermediate (WTI).
“We look for new highs .. in carrying this advance higher to around the $52-52.50 area before this spring advance fully plays out,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Co.
Brent LCOc1 was up 76 cents, or 1.6 percent, at $49.37 a barrel by 9:40 a.m. EDT (1328 GMT). The session high was $49.39.
WTI CLc1 rose 60 cents, or 1.3 percent, to $49.22, peaking at $49.45.
Oil traded above $100 a barrel in mid-2014 before crashing on a global supply glut.
“We are definitely moving out of this surplus situation that we’ve been living in since mid-2014,” Bjarne Schieldrop, head commodities strategist at SEB Merchant Banking in Geneva, said. “There will still be some time, maybe six months of surplus, but then we’re basically into rebalancing.”
Some argue that the outages are temporary and crude flows will be restored to optimum levels eventually, pressuring prices.
“Maybe it’s silly to stand in front of this bus, but I would at least suggest that the bulls be careful here,” Scott Shelton, energy broker at ICAP in Durham, North Carolina, wrote in a commentary.
(Additional reporting by Amanda Cooper in LONDON, Osamu Tsukimori in TOKYO and Keith Wallis in SINGAPORE; Editing by Bernadette Baum)