Oil heads for second weekly gain after surprise stockpile drop

LONDON (Bloomberg) -- Oil headed for a second weekly increase as a surprise pullback in U.S. crude inventories compounded signs that a global glut is easing.

Futures in New York are up 1.7% this week after closing at the highest level in two weeks on Thursday. While the U.S. is pumping near record volumes, exports also jumped to a four-month high last week, helping drain the nation’s stockpiles.

Oil stocks in the biggest U.S. storage hub plunged to the lowest level in more than three years. While crude struggled after the best January performance in more than a decade, it’s now finding its footing again as the Organization of Petroleum Exporting Countries and its allies including Russia pledge to persist with output curbs to re-balance the market, and demand remains robust.

“Crude stockpiles resumed their downward trajectory” in the U.S., said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London. “The report was well-received by market bulls.”

West Texas Intermediate for April delivery fell 6 cents at $62.71/bbl on the New York Mercantile Exchange, after rising $1.09 on Thursday. Total volume traded was about 42% below the 100-day average.

Brent for April settlement slipped $0.11 to $66.28/bbl on the London-based ICE Futures Europe exchange. Prices are up 2.2% this week, also set for a second weekly gain. The global benchmark crude was at a $3.62 premium to WTI.

U.S. crude exports rose to about 2 MMbpd last week, according to EIA data Thursday. Nationwide inventories declined the most in five weeks to 420.5 MMbbl, in contrast to a 2.9 MMbbl gain forecast in a Bloomberg survey. Stockpiles at the storage hub of Cushing, Oklahoma, shrank for a ninth straight week to 30 MMbbl.

The country’s crude production ticked lower for the first time since early January to 10.3 MMbpd, the EIA report also showed. Baker Hughes data due on Friday will show the number of rigs drilling for oil in America, which had risen to a two-year high last week.

Oil Market News

The global oil market is rebalancing and the decline in oil inventories is expected to continue in 2018, said Saudi Arabia Energy Minister Khalid Al-Falih. Egypt’s Oil Minister Tarek El-Molla said he sees crude trading at $60 to $70/bbl as fair, adding the nation currently has no plan to join global crude production cuts. Gasoline futures in New York are up 0.4% this week, extending last week’s 3% gain.