Crude Rises to Two-Week High as World Tugs on US Oil Supplies
(Bloomberg) -- Crude in New York rose to a two-week high amid signs of expanding worldwide demand for the growing abundance of U.S. oil.
The U.S. benchmark settled 0.4 percent higher on Tuesday in New York. American crude exports have increased in four of the past five weeks, drawing supplies away from the key storage hub in Cushing, Oklahoma, to coastal shipping terminals. The worldwide glut that’s dogged major producers such as Saudi Arabia and Nigeria appears to be fading faster than anticipated.
“People are looking at the market kind of re-balancing a bit between the U.S. and their external market,”’ Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said in phone interview.
Crude is holding above $60 a barrel in New York, though futures are trading below last month’s highs. As the Organization of Petroleum Exporting Countries and allied producers have succeeded in whittling away most of the glut that triggered the worst market collapse in decades, American explorers have been shipping more crude overseas as they pump oil at record rates.
West Texas Intermediate for March delivery, which expired at Tuesday’s close, gained 22 cents to settle at $61.90 a barrel on the New York Mercantile Exchange. The more active April contract traded at $61.79.
Brent for April settlement dropped 42 cents to $65.25 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $3.46 premium to April WTI.
The gap between WTI and Brent last week shrank to the narrowest in six months as supplies at the Cushing hub shrank. Inventories at Cushing -- the delivery point for Nymex crude contracts -- probably fell by 2.5 million barrels last week, according to a Bloomberg forecast. Stockpiles declined by 3.64 million barrels the previous week.
“The large theme in the market, as far as relative value is concerned, is Brent-WTI and specifically it is linked to a dramatic drop in inventories in Cushing, Oklahoma,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. “It is up versus Brent by a considerable amount and I think this trend is going to continue.”
Worldwide oil demand is on track to reach 100 million barrels a day this year, Franco Magnani, trading and shipping chief for Italian oil giant Eni SpA, said on Tuesday.
The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, rose as much as 0.6 percent. A stronger greenback typically reduces investors’ interest in commodities.
Maintaining the OPEC alliance with other producers including Russia would help avoid future supply gluts or shortages, United Arab Emirates Energy Minister Suhail Al Mazrouei said in a Bloomberg TV interview, adding he hoped the alliance would last “ forever.” BP Plc CEO Bob Dudley expects oil and gas to remain in demand for decades as population growth fuels energy consumption, particularly in Asia and Africa, he said in London. Gasoline futures for March delivery expired little changed on the day at $1.7503 a gallon.
With assistance from Rakteem Katakey, Tsuyoshi Inajima, Heesu Lee, Javier Blas and Jessica Summers. To contact the reporters on this story: Meenal Vamburkar in New York at email@example.com; Milana Vinn in New York at firstname.lastname@example.org. To contact the editors responsible for this story: Reg Gale at email@example.com Joe Carroll, Carlos Caminada.
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