Oil Climbs as US Stockpiles Point to Tightening Supply Picture



Oil Climbs as US Stockpiles Point to Tightening Supply Picture
Oil rose as traders braced for a US government report that's expected to show sliding domestic crude stockpiles.

(Bloomberg) -- Oil rose for the first time in four sessions as traders braced for a U.S. government report that’s expected to show sliding domestic crude stockpiles.

Futures rose 1.2 percent in New York on Tuesday. Twelve of the 13 analysts in a Bloomberg survey said Wednesday’s weekly Energy Information Administration tally will show oil stockpiles declined last week, tightening supplies in the world’s biggest economy. With American crude selling at a 13 percent discount to the international benchmark, overseas demand for U.S. oil is strengthening.

The price advantage for crude from U.S. wells “just begs for more exports” of U.S. crude, said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York.

Traders are gauging U.S. stockpiles and production figures ahead of a key OPEC meeting later this month where the cartel and allied producers will discuss relaxing output caps. American drillers are pushing production toward the 11 million-barrel-a-day mark, depressing prices for domestic supplies.

The U.S. benchmark West Texas Intermediate is sitting below its 50-day moving average.

WTI for July delivery rose 77 cents to settle at $65.52 a barrel on the New York Mercantile Exchange.

Competing Barrels

Brent futures for August settlement rose 9 cents to end the session at $75.38 on the London-based ICE Futures Europe exchange. Brent traded at a $9.92 premium to WTI for the same month.

“People are looking at the talk of an increase from OPEC and especially thinking that the barrels will tend to compete in the Atlantic market with Brent, so that’s pushing Brent down,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

In the U.S., crude inventories probably dropped by 2.1 million barrels last week, according to the median estimate in a Bloomberg survey. At the key pipeline hub in Cushing, Oklahoma, inventories fell by an estimated 500,000 barrels, according to a separate Bloomberg forecast.

The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.

Other oil-market news:

Gasoline futures dropped 0.8 percent to settle at $2.1062 a gallon. Saudi Arabia raised pricing on key crude grades for buyers in Asia to the highest since 2014 as demand climbed in the kingdom’s biggest market. OPEC Secretary General Mohammad Barkindo agreed with the estimate of the current oil market situation, Russian Energy Minister Alexander Novak told reporters in Vienna. Oil demand is surging higher in 2018 and consumption in China is probably stronger than the market’s anticipating, Jeff Currie, head of commodities research at Goldman Sachs Group Inc., said at the S&P Global Platts Crude Oil summit in London.

With assistance from Tsuyoshi Inajima, Heesu Lee and Alex Longley. To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net. To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net Joe Carroll, Carlos Caminada.



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