Oil Closes Near $47 as Traders Assess US Stockpiles, Output

(Bloomberg) -- Oil in New York closed near $47 a barrel, a new "battle line" for bullish and bearish traders, as they assessed U.S. supply data and key technical levels.

Futures added 0.7 percent, after switching between gains and losses during the session. U.S. production had its biggest weekly gain since the end of June, yet crude stockpiles slid the most since September, Energy Information Administration data showed Wednesday. A slump of more than 6 percent so far this month hasn’t brought prices below the 50-day moving average yet, showing some support.

“This is the battle line right here, between the bulls and the bears, right around $47,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said by telephone. “It’s worth it to some to try and pick up what looks like cheap crude oil at the moment, but again, there’s a lot of bearish factors in this market.”

Oil has failed to hold a rise above $50 since May as the Organization of Petroleum Exporting Countries and its allies struggle to reduce elevated crude supplies. While U.S. stockpiles have dropped for seven weeks, concerns remain that the declines may only be seasonal. Oil is probably capped at $60 a barrel during the next five years due to plentiful supplies from both OPEC and U.S. shale, according to Citigroup Inc.

WTI for September delivery rose 31 cents to settle at $47.09 a barrel on the New York Mercantile Exchange. Total volume traded was about 20 percent above the 100-day average. Prices fell 77 cents to close at $46.78 Wednesday, the lowest since July 24.

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Brent for October settlement climbed 76 cents to end the session at $51.03 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $3.79 to October WTI, the largest since September 2015.

Brent crude’s October-November spread strength relative to WTI is caused by temporary factors of lower North Sea crude production and higher West African crude flows to Asia, Michael Wittner, the head of commodities research at Societe Generale SA in New York, said in a note. Hedge funds have been more bullish on Brent than on WTI.

Sizable Drop

While U.S. crude stockpiles slid by 8.95 million barrels to 466.5 million last week, supplies at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, expanded a second week to 57 million barrels. Crude output rose by 79,000 barrels a day last week to 9.5 million a day, the EIA reported.

“Crude inventories dropping almost 9 million barrels is a pretty sizable drop. I would have expected prices to be a little better than they were today,” Stewart Glickman, an energy equity analyst at CFRA Research in New York, said by telephone. But, sentiment in the market is “still pretty weary.”

Oil-market news:

Royal Dutch Shell Plc’s Deer Park, Texas refinery is said to have its biggest crude unit shut after a Thursday morning fire, according to people familiar with operations. Saudi Arabia, the world’s biggest crude exporter, shipped the least oil in almost three years in June, just as domestic stockpiles are dwindling.

With assistance from Melissa Cheok, Ben Sharples and Grant Smith. To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Carlos Caminada, Joe Carroll.


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