Oil prices rose more than $1 a barrel on Thursday after U.S. data showed a surprise decline in inventories, suggesting that a global glut may be ending after moves by OPEC to cut production.
Benchmark Brent crude oil LCOc1 jumped $1.08 a barrel to $56.92 before easing back to $56.85 by 1315 GMT. U.S. light crude CLc1 hit a high of $54.64, up $1.05 a barrel.
Both benchmarks are near the top of relatively narrow $4 ranges that have contained trade so far this year, reflecting a period of low volatility since the Organization of the Petroleum Exporting Countries and other exporters agreed to cut output.
So far OPEC appears to be sticking to its deal but other producers, notably U.S. shale companies, have increased output, helping swell stocks in the United States, the world’s biggest oil consumer.
Industry data on Wednesday showed U.S. crude inventories fell by 884,000 barrels in the week to Feb. 17 to 512.7 million, compared with analyst expectations for an increase of 3.5 million barrels. [API/S]
U.S. gasoline and distillate fuel stocks also fell, the American Petroleum Institute (API) said.
Tamas Varga, analyst at London brokerage PVM Oil Associates, said oil prices could rally further if the U.S. government’s Energy Information Administration (EIA) also reports a fall in inventories when its data is published at 11 a.m. EST (1600 GMT) on Thursday.
“Confirmation of the bullish set of inventory data from the EIA this afternoon will send prices to the upper end of the current trading range,” Varga said. “If, however, the figures disappoint those who have gone long overnight and this morning will likely run for the exit.”
Tony Nunan, risk manager at Mitsubishi Corp, said the market needed to see that stocks outside the United States were also falling for prices to break out of their trading ranges.
“It’s a battle between how quick OPEC can cut without shale catching up,” Nunan said, referring to U.S. drilling in shale formations that has shown an upsurge this year. [RIG/U]
“What OPEC really has to do is get the inventories down.”
(Additional reporting by Aaron Sheldrick in Tokyo; Editing by Dale Hudson and Susan Thomas)