Oil rises from three-year high as US stockpiles seen plunging

Oil extended gains from the highest close in more than three years as US industry data signalled crude stockpiles dropped an eighth week.

Futures climbed as much as 1.1% in New York after rising 2.5% the previous two sessions. US crude inventories fell by 11.2 MMbbl last week, the American Petroleum Institute was said to report on the 9^th January; it would be the biggest decline for this time of the year since 1999.

Oil is continuing its advance after a second annual gain as the Organisation of Petroleum Exporting Countries and its allies trim supply to drain a global glut. The group is facing the challenge of rising US crude output, which the EIA expects to rise above ten million barrels a day as soon as next month, before eventually topping 11 million in November 2019.

“It’s not completely unexpected given the price momentum,” Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said of oil’s latest gains. But “the shale rebound is also for real” and there’s a risk of a “massive price slump.”

West Texas Intermediate for February delivery rose as much as 71 cents to US$63.67/bbl on the New York Mercantile Exchange, and was at US$63.44 at 1:44 pm in London. Total volume traded was about 23% above the 100-day average. Prices advanced US$1.23 to US$62.96 on the 9^th January, the highest close since December 2014.

Brent for March settlement climbed as much as 55 cents, or 0.8%, to US$69.37/bbl on the London-based ICE Futures Europe exchange after advancing 1.5% on the 9^th January to the highest since December 2014. The global benchmark crude was at a premium of US$5.85 to March WTI.

US crude inventories probably dropped by 3.75 MMbbl last week, according to a Bloomberg survey before the EIA report. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, probably slid by 1.5 MMbbl, an estimate compiled by Bloomberg shows.