Oil Rises Toward 5-Month High

(Bloomberg) -- Oil climbed to near a five-month high after an industry report pointed to a third straight weekly drop in American crude stockpiles.

Futures in New York rose past $42 a barrel after losing 0.8% Tuesday. The American Petroleum Institute reported inventories fell by 4.01 million barrels last week, according to people familiar with the data. The official Energy Information Administration figures are due later on Wednesday.

The stockpiles data overshadowed anxiety over the still-surging coronavirus. Infections breached 20 million globally, Florida reported another day of record deaths and New Zealand’s largest city went back into lockdown.

Oil is struggling to climb above its 200-day moving average as ongoing uncertainty over the trajectory of the demand recovery from the pandemic keeps gains in check and OPEC+ returns some barrels to the market. Drilling activity in the U.S., the world’s biggest producer, isn’t likely to be rebound until next year unless prices move back toward $50 a barrel in the next few weeks, Rystad Energy said in a note.

The API numbers lent some support, but prices are likely to be capped at recent highs, said Warren Patterson, head of commodities strategy for ING Bank NV. “The recovery in demand is still a big worry for the market, particularly given that OPEC+ supply is edging higher.”

The contango in the three-month timespread for the global crude benchmark was $1.23 a barrel, widening from $1.03 at the end of last week. The change in the market structure -- where prompt prices are cheaper than later-dated ones -- is an indication that concern around over-supply is increasing.

American crude oil production will be 11.26 million barrels a day this year, the Energy Information Administration forecast, down from July’s 11.63 million estimate. Gasoline and distillates stockpiles also fell last week, the API said, while inventories at the Cushing storage hub rose by 1.1 million barrels.

Other Oil-Market News

• Saudi Arabia will grant the oil supply asked for by several Asian refiners next month, while accommodating some requests for reduced volumes of its lighter grade.
• Occidental Petroleum Corp. will have just a single oil rig in the Permian Basin in the second half of the year, illustrating the scale of the shale industry’s pullback and the company’s debt woes.
• The oil cleanup from a leaking cargo ship that ran aground off the coast of Mauritius continues while the government and insurance firms begin probing liability for the accident

To contact the reporters on this story:
Elizabeth Low in Singapore at elow39@bloomberg.net;
James Thornhill in Sydney at jthornhill3@bloomberg.net

To contact the editors responsible for this story:
Serene Cheong at scheong20@bloomberg.net
Andrew Janes, Ben Sharples

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