Oil extended gains after closing at the highest level in more than a year as declines in U.S. and Chinese crude stockpiles added impetus to a rally driven by tightening global supplies.
Futures in New York climbed to trade above $55 a barrel. The American Petroleum Institute reported crude inventories fell by 4.3 million barrels last week, people familiar with the data said. It would be a seventh decline in eight weeks if confirmed by government data later Wednesday. Chinese stockpiles dropped to the lowest in almost a year, according to data provider Kayrros.
The tighter supplies are bringing traders flocking back to the oil market. Holdings of WTI futures contracts are now at their highest level since April, having jumped by the equivalent of more than 235 million barrels so far this year.
Whittling down stockpiles has been a major objective for OPEC and its allies. A committee of the alliance is scheduled to meet on Wednesday to discuss the supply and demand situation as the pandemic continues to rage but more vaccines are being rolled out. Crude’s futures price curve is established in a bullish backwardation structure, suggesting investors are comfortable.
“The crude oil market is getting close to a frenzy,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “A reflection of the tightening global crude oil market is the continued strengthening of the Brent crude oil curve.”
An OPEC+ technical panel said Tuesday it expects the oil surplus will drain by the middle of the year after Saudi Arabia’s unilateral output cuts. Morgan Stanley said visible stockpiles have fallen by 3.6 million barrels a day over the last 30 days.
Prices further out along the futures curve are also climbing. WTI for next year topped $50 a barrel on Wednesday to trade at the highest since February. It may incentivize producers to add more supply in the coming months.
