Azernews.Az

By Bloomberg

Oil traded near the highest closing price in five months after crude inventories in the U.S. fell for the first time since January.

Futures gained as much as 1.1 percent in London. Crude stockpiles in the world’s biggest oil consumer shrank by 3.88 million barrels last week, the first drop in four months, the Energy Information Administration reported Wednesday. Supplies remain more than 100 million barrels above the five-year average for this time of the year.

Oil has rebounded about 50 percent from a six-year low reached in January as drillers in the U.S. cut the number of active rigs to the fewest since September 2010, slowing output. The recovery may still falter as shale-oil companies including Chesapeake Energy Corp. lift their production outlook while others signal an increase in drilling.

“The oil market has very strong positive momentum behind it with people reading into the data what they see as bullish signs,” Eugen Weinberg, head of commodities research at Frankfurt-based Commerzbank AG, said by phone. “The current price increase is fundamentally unjustified and will only prolong the pain for producers in the long term as the clean-up of the oversupply will take longer.”

Brent for June settlement increased as much as 72 cents to $68.49 a barrel and was at $68.12 at 12:47 p.m local time on the London-based ICE Futures Europe exchange. It closed yesterday at $67.77, the highest level since Dec. 5. Total trading volume was 30 percent above than the 100-day average for the time of day. Prices have risen 19 percent this year.

U.S. Supplies

West Texas Intermediate for June delivery increased 9 cents to $61.02 a barrel in electronic trading on the New York Mercantile Exchange. The European benchmark crude traded at a premium of $7.10 to WTI.

While U.S. crude stockpiles declined to 487 million barrels last week, supplies remain near the highest level since 1930, based on monthly EIA records dating back to 1920. A 17th weekly gain was projected in a Bloomberg survey of analysts.

The slide in inventories was driven by higher refinery processing, “flat” crude production and reduced imports, according to Societe Generale SA. The record expansion in U.S. inventories will end this month, analysts including Michael Wittner in New York said in an e-mailed report.

Production shrank by 4,000 barrels a day to 9.37 million a day for the third drop in four weeks, data from the Energy Department’s statistical arm showed. The U.S. rig count is down 57 percent since December, Baker Hughes Inc., an oil-services company, reported May 1.

Shale Producers

Shale explorer EOG Resources Inc. said Tuesday it plans to boost drilling as soon as the market stabilizes at about $65 a barrel, while Carrizo Oil & Gas Inc. and Devon Energy Corp. this week raised their full-year production outlook.

“Based on trends and information we have and what’s happening in the U.S. drilling sector and consequences for the related industry, our expectation is that by the end of 2016 we can see this figure of $80,” Roknoddin Javadi, deputy oil minister and managing director of National Iranian Oil Co., said Thursday in Tehran.

Iranian Oil Minister Bijan Namdar Zanganeh said Wednesday that $70 to $75 a barrel is a suitable price for crude. The fifth-largest member of the OPEC could start to accelerate output within 10 days if international economic sanctions are removed, he said in Tehran.

Production would increase to 3.8 million barrels a day within six months and 4 million in less than a year, Zanganeh said at a news conference Wednesday. Iran pumped 2.78 million a day in April, data compiled by Bloomberg show.