Oil extended its advance to trade above $US61 a barrel on signs the US supply glut is easing.
Futures gained as much as 2.1 per cent in New York, rising from the highest close since December. Crude inventories fell by 1.5 million barrels through May 1, the first drop in industry data in eight weeks, the American Petroleum Institute was said to have reported on Tuesday. An increase of 1.5 million barrels is forecast in a Bloomberg survey before a government report on Wednesday.
Oil is recovering from a six-year low in March as US companies reduced the number of active rigs to the fewest since September 2010, bolstering speculation that output will slow. The rally may still falter, with crude stockpiles at the highest level in 85 years and shale-oil producers including EOG Resources preparing to boost drilling as prices rebound.
"Producers are starting to respond in terms of supply and we're seeing that with the shale rigs," said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. "Oil at $60 is a big level and I expect it to spend some time around here. The move is generally bullish and it should be supported."
West Texas Intermediate for June delivery climbed as much as $US1.29 to $US61.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract advanced $US1.47 to $US60.40 on Tuesday, the highest close since December. 10. The volume of all futures traded was about 4 per cent above the 100-day average. Prices have gained 15 per cent this year.
Brent for June settlement rose as much as $US1.01, or 1.5 per cent, to $US68.53 a barrel on the London-based ICE Futures Europe exchange. It climbed $US1.07 to $US67.52 on Tuesday, the highest close since December 5. The European benchmark crude traded at a premium of $US6.85 to WTI.
Crude inventories in the US, the world's largest oil consumer, expanded for 16 weeks until April 24 to 490.9 million barrels, data from the Energy Information Administration showed. That's the highest level since 1930, based on monthly records from the Energy Department's statistical arm dating back to 1920.
Supplies at Cushing, Oklahoma, the delivery point for WTI contracts and the nation's biggest oil-storage hub, declined by 336,000 barrels last week, the API in Washington reported, according to ForexLive.
The industry group collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that data be filed with the EIA for its weekly survey.
EOG chairman and chief executive officer William Thomas said on Tuesday his company will increase drilling as soon as the market stabilises at $US65 a barrel. Pioneer Natural Resources Co plans to add drilling rigs from July, subject to oil price movements and the sale of assets.
Drillers seeking oil in the US cut the number of active machines by 24 to 679 in the week ended May 1, according to Baker Hughes, an oilfield-services company. The rig count has slid 57 per cent since the start of December.
Saudi Arabia, the world's largest crude exporter, kept pricing of its main Arab Light unchanged for June sales to Asia. The grade will sell at US60¢ a barrel below a regional benchmark next month, state-owned Saudi Arabian Oil Co said. Iran is also forecast to maintain its discount for light crude, according to a quarterly formula.
The 14-day relative strength indexes for both WTI and Brent have climbed to more than 70, the highest readings since June, data compiled by Bloomberg showed. Investors typically sell contracts above that level as it indicates a market has risen too quickly to sustain further gains.
DLS Price at posting:
$1.18 Sentiment: None Disclosure: Held
