Published: Oct 19, 2016 11:33 a.m. ET

U.S. benchmark on track for highest close since July 2015

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Oil futures rallied Wednesday, with the U.S. benchmark on track to close around a 16-month high after U.S. government data revealed a surprise drop in crude stockpiles, marking the sixth decline in seven weeks.

Prices also got an added boost after an official from Saudi Arabia said oil producers who are not members of the Organization of the Petroleum Exporting Countries have shown willingness to join the cartel’s effort to limit output.

November West Texas Intermediate crude CLX6, +2.78% which expires at Thursday’s settlement, gained $1.13, or 2.3%, to $51.42 a barrel on the New York Mercantile Exchange. 1.49% to $51.04 a barrel. It hasn’t settled at a level this high since mid-July of last year, according to FactSet data. December Brent crude LCOZ6, +2.26%  rose $1.16, or 2.2%, to $52.84 a barrel on London’s ICE Futures exchange, set for its highest finish in just over a week.

The large draw in U.S. crude inventories was “encouraged by a large week-on-week drop in imports,” said Matthew Smith, director of commodity research at ClipperData. Government data showed U.S. imports fell 954,000 barrels a day from a week earlier.

The U.S. Energy Information Administration early Wednesday reported that domestic crude supplies dropped by 5.2 million barrels in the week ended Oct. 14. Analysts polled by S&P Global Platts expected a 2.5 million-barrel climb, while the American Petroleum Institute late Tuesday reported a decline of 3.8 million barrels.

John Macaluso, an analyst at Tyche Capital Advisors, said the extended outage of Plains All American’s Basin pipeline, which is capable of delivering almost nearly 500,000 barrels a day of Permian crude into Cushing, Okla., is part of the reason for the surprise decline in crude stocks.

U.S. crude-oil stocks have now dropped 26.5 million barrels since the beginning of September, according to Troy Vincent, an analyst at ClipperData. Over the same period last year, crude stocks built by 12.9 million barrels “as reduced [refinery] runs allowed stocks to swell,” he said.

Total U.S. crude production, however, inched up by 14,000 to 8.464 million barrels a day, according to the EIA. The data show output “advances at these prices for U.S producers,” said Macaluso.

Among the products, gasoline supplies rose by 2.5 million barrels, while distillate stockpiles fell by 1.2 million barrels, according to the EIA.

November gasoline RBX6, +0.21%  tacked on less than half a cent to $1.509 a gallon, while November heating oilHOX6, +1.86%  rose 3.6 cents, or 2.3%, to $1.604 a gallon on Nymex/

“Refinery runs have moved lower once again, meaning less demand for crude oil, as we are likely at the peak of refinery maintenance season,” Smith said. Still, the runs remain above year-ago levels, and gasoline inventories still saw a solid build “as implied demand dropped considerably on the prior week.”

Meanwhile, traders continued to eye developments surrounding OPEC’s production plan.

“We see a strong uptick as the market is looking for a potential impact of the OPEC agreement coming in November and [the cartel’s] production falling by year-end which we see as unrealistic,” said Eugen Weinberg, an analyst at Commerzbank.

Even if individual production quotas are assigned to members countries, it remains to be seen if they will abide by them. Also, as Iran, Libya, and Nigeria are exempt from the deal, some analysts say incremental increases in their productions could offset reductions from OPEC members, sending the group’s overall production on an uptrend instead of a downtrend.

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Many oil investors and banks, including Goldman Sachs, have described the plan to slash production as “self-defeating” as higher prices may widen the market for U.S. shale drillers who would swoop in and essentially extend the global supply glut.

A survey of investment banks by The Wall Street Journal predicted Brent crude will average $56 a barrel next year.

“We remain skeptical over any significant rally in crude oil prices over the next six to 12 month horizon, as any print above $60 a barrel would be persuasive enough to lift U.S. shale oil production,” said Barnabas Gan, an economist at OCBC.