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Oil rises towards $53 before US inventory report

Published: Updated:

Oil rose towards $53 a barrel on Wednesday ahead of a US inventory report expected to show crude stocks dropped for a sixth week, although gains were capped by doubts about compliance with OPEC-led supply cuts.

Crude inventories last week fell by 7.8 million barrels, more than expected, but gasoline stocks rose unexpectedly, data from the American Petroleum Institute (API) showed on Tuesday before the release of Wednesday’s official numbers.

Brent crude, the global benchmark, was up 50 cents at $52.64 at 1304 GMT, after two days of decline. US West Texas Intermediate (WTI) crude added 44 cents to $49.61.

Wednesday’s focus will be on the US government report at 1430 GMT to see whether it confirms the figures from the API, an industry group. Analysts expect crude stocks to have fallen by 2.7 million barrels and gasoline by 1.5 million barrels.

“They are also likely to show a significant inventory reduction due to lower imports,” Commerzbank’s Carsten Fritsch said of the Energy Information Administration report.

“It seems to be toppish and prices are struggling to rise on bullish news,” he added.

A further drop in US crude stocks would raise hopes that an OPEC-led effort to wipe out a three-year, price-sapping supply glut is working.

The Organization of the Petroleum Exporting Countries, Russia and other producers are cutting output by about 1.8 million barrels per day (bpd) under a deal that took effect on January 1 and is currently set to run until March 2018.

The deal has supported prices but an output recovery in Libya and Nigeria, OPEC members exempt from the cut, has complicated the effort. US shale oil drillers have also ramped up production.

Abu Dhabi meet

OPEC officials met on Monday and Tuesday in Abu Dhabi in an effort to boost producers’ adherence to the supply cuts, which has been high on average despite relatively low compliance by Iraq and the UAE.

In a statement after the meeting, OPEC said the conclusions reached would help boost compliance. Still, it gave little detail and some analysts remained skeptical.

“The statement on the OPEC website following the Abu Dhabi meeting was short on substance,” Vienna-based JBC Energy said.

Top OPEC exporter Saudi Arabia, keen to get rid of the glut, has shown one of OPEC’s highest rates of compliance and in September will cut crude allocations to customers by at least 520,000 bpd, an industry source said on Tuesday.