Oil held above $65 a barrel after U.S. crude inventories unexpectedly dropped, falling below the five-year average in a sign that OPEC-led supply cuts aimed at shrinking a glut are bearing fruit.
Futures in New York were little changed after jumping to a six-week high on Wednesday. American crude stockpiles fell last week, government data showed, confounding more than 80 percent of analysts in a Bloomberg survey who expected an increase. That means inventories in the U.S., which is taking less OPEC-produced oil than ever before, are below the five-year average for the first time since 2014.
Oil prices are approaching the highs of January after a global equity market rout that spread to commodities spurred its worst February decline in half a decade. While investors continue to weigh surging U.S. crude production, the Organization of Petroleum Exporting Countries and its allies have concluded that the market will rebalance between the second and third quarter of this year.
“We may start to see concerns about a supply glut later in the year if U.S. crude production increases, but at the moment we’re not seeing an oversupply,” said Mikiko Tate, a senior analyst at Sumitomo Corporation Global Research Co., said by phone from Tokyo. “Things are looking alright.”
West Texas Intermediate crude for May delivery declined 3 cents to $65.15 on the New York Mercantile Exchange at 4:31 p.m. in Tokyo. The May contract climbed $1.63 to $65.17 on Wednesday, the highest since early February. Total volume traded was about 23 percent below the 100-day average.
Brent for May settlement slipped 12 cents to $69.35 a barrel on the London-based ICE Futures Europe exchange. The contract on Wednesday jumped $2.05 to $69.47. The global benchmark traded at a $4.22 premium to WTI.
U.S. crude inventories fell by 2.62 million barrels last week, according to the Energy Information Administration’s data on Wednesday. Analysts had forecast a gain of 3.25 million barrels, and only two of the 12 analysts had expected a decline of a lesser magnitude.
America’s gasoline inventories also tumbled for a third week to the lowest level since late January, while distillate stockpiles contracted for a sixth straight week to the lowest since December, according to the EIA. Still, while stockpiles have declined, U.S. oil production has continued to surge, with output hitting a fresh record last week.
Meanwhile, U.S. weekly crude imports from seven OPEC members fell 14 percent to 1.86 million barrels a day last week, the lowest level since the EIA began collecting weekly data in 2010. The decline comes as OPEC saw record compliance with production-cut targets in February as the group continues efforts to drain a global glut.
Still, whether the decline in American inventories can reassure OPEC is uncertain. The producer group is said to be discussing changes to the way they measure the impact of their production cuts. One of the options is looking at the past seven years of inventories in OECD countries. By that measure, just looking at the U.S. part of it, inventories have about 28 million barrels to go.
Source: Bloomberg
