Oil Advances as US Crude Stockpiles Seen Falling, Easing Glut

Narrowing Spread

"There’s a slight chance that crude supplies rose last week, and if that’s the case it will be due to imports," O’Grady said. "The narrowing of the spread with Brent could lead to increased arrivals. Inventories will rise in the new year and things could get ugly by mid January."

Saudi Arabia will cut spending next year and reduce energy subsidies as revenue is projected to drop by more than 15 percent. Oil sales will make up about 70 percent of the country’s budget next year, according to Ashmore Group’s Sfakianakis.

Iran has completed a “significant step” in fulfilling its nuclear commitments, according to U.S. Secretary of State John Kerry. As Iran prepares to add more supply to the glut, hedge funds reduced bets on rising prices to a three-month low in the week ended Dec. 22, data from the U.S. Commodity Futures Trading Commission show. Money managers also cut their bullish bets on Brent crude during the period, data from ICE Futures Europe show.

Commodities climbed after China’s stocks rebounded from the biggest drop in a month, reducing concern about the world’s second-biggest economy. The Bloomberg Commodity Index, a gauge of 22 raw materials, rose as much as 1.6 percent. It slumped to the lowest level since 1999 on Dec. 17.

Diesel rose as colder weather arrived in much of the U.S., increasing demand for home-heating fuel. January diesel futures rose 3.91 cents, or 3.6 percent, to settle at $1.1295 a gallon in New York. It’s the biggest gain since Dec. 3.

--With assistance from Sharon Cho and Rakteem Katakey.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net; James Herron at jherron9@bloomberg.net; David Marino at dmarino4@bloomberg.net Susan Warren.