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By Bloomberg

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

Futures rose as much as 1.6 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, while a decrease of 1.75 million barrels is forecast in a Bloomberg survey before government data Wednesday. The global surplus will disappear by the end of 2016, an official from Trafigura Beheer BV said.

Oil’s recovery from a six-year low in March has faltered 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 to $58.90 a barrel in electronic trading on the New York Mercantile Exchange and was at $58.45 at 1:25 p.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 39 percent below the 100-day average. Prices have gained about 10 percent this year.

U.S. Supplies

Brent for July settlement rose as much as $1.16, 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 $6.45 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 supplies 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. Stockpiles 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.

The global surplus will disappear by the end of 2016, Jonathan Kollek, president of Trafigura Eurasia, said at a Platts conference on Wednesday. It’s more likely that prices will rise than fall, he said.

Rebound Premature

The worst of the slump is over and prices may continue to rise into 2016, 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 same event on Tuesday. Increasing exports from Libya won’t hurt the oil market, he said.

While U.S. companies have reduced the number of rigs drilling for oil 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, business development manager at Unipec U.K., said at the Platts forum on Tuesday.

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