Azernews.Az

By Bloomberg

Oil snapped a five-day retreat on signs the oversupply in U.S. crude stockpiles is moderating.

Futures rose as much as 1.4 percent in New York after plunging 6.1 percent in the past five sessions. U.S. crude supplies shrank through May 15 for a third week, the industry- funded American Petroleum Institute was said to have reported. A decrease of 1.75 million barrels is forecast in a Bloomberg survey before government data Wednesday. The worst of the slump is over and prices may continue to rise into 2016, a Libyan official said.

Oil’s recovery from a six-year low is faltering near $60 a barrel amid speculation that rising prices will encourage production. The Organization of Petroleum Exporting Countries, led by Saudi Arabia, has resisted calls to reduce output, exacerbating global oversupply. U.S. crude inventories have fallen for two weeks after hitting an 85-year high, government data show, indicating the glut may be abating.

“U.S. inventory reports have supported the oil prices of late,” Ole Hansen, head of commodity strategy at Copenhagen- based Saxo Bank A/S, said by phone. “The current price level might not be sustainable given OPEC output continues to grow and U.S. supply has proven resilient.”

West Texas Intermediate for July delivery climbed as much as 91 cents, or 1.6 percent, to $58.90 a barrel in electronic trading on the New York Mercantile Exchange and was at $58.79 at 9:18 a.m. London time. The June contract expired Tuesday after slipping 3.7 percent to $57.26, the lowest close since April 28. The volume of all futures traded was about 23 percent below the 100-day average. Front-month prices have gained 10 percent this year.

U.S. Supplies

Brent for July settlement rose as much as $1.2, or 1.8 percent, to $65.18 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $6.23 to WTI.

Stockpiles at Cushing, Oklahoma, the delivery point for WTI contracts and the nation’s largest oil-storage hub, fell by 217,000 barrels last week, the API in Washington reported Tuesday, according to ForexLive. Crude inventories shrank by 5.2 million barrels.

Crude inventories in the U.S., the world’s biggest oil user, slid to 484.8 million barrels through May 8, data from the Energy Information Administration showed last week. Supplies remain near the highest level since 1930, based on monthly records dating back to 1920, and are more than 100 million barrels above the five-year average for this time of the year.

Rebound Premature

Increasing exports from Libya won’t hurt the oil market, according to Mustafa Sanalla, Chairman of Tripoli-based Libya National Oil Corp., whose authority is contested by the country’s United Nations-recognized government.

Libya is completing maintenance that will allow the country to add 200,000 barrels a day of supply, Sanalla said at the Platts Crude Oil Forum Tuesday.

The continuing surplus will drive WTI to $45 a barrel by October, Goldman Sachs Group Inc. said.

The availability of cheap capital exacerbates the need for sustained low prices to keep U.S. producers from boosting output, according to Goldman. The recent rebound is premature, analysts including Jeffrey Currie said in a May 18 report.

While U.S. drillers have reduced the rig count by 58 percent since December, output remains near a record. The nation pumped 9.37 million barrels of oil a day through May 8, according to the Energy Department’s statistical arm. Production averaged 9.42 million a day in the week to March 20, the fastest pace since at least January 1983.

OPEC, which supplies about 40 percent of the world’s oil and meets June 5, may continue to increase output after the recent price rally, Bill Chalker, the business development manager at Unipec U.K., said at the Platts forum.

OPEC produced 31.3 million barrels a day in April, according to data compiled by Bloomberg. The 12-member group exceeded its collective output quota of 30 million barrels for a 11th month, the data show.