US Oil Jumps Above $60 for First Time This Year as Glut Eases
Stockpiles probably increased last week by the least in four months, according to a Bloomberg survey before a government report May 6. Supplies at Cushing, Oklahoma, the main U.S. oil-storage hub, already have declined. EOG Resources Inc., the largest shale-oil producer, said it lost money in the first quarter after taking steps to halt output growth after the price slump.
Crude has rebounded from a six-year low in March as U.S. drillers cut the number of operational oil rigs to the fewest since 2010, curbing production growth. The rally may yet falter if higher prices encourage producers to resume pumping too quickly.
“Sixty dollars was kind of the last area of resistance,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. “This week probably is the last build if we get one, and from now until roughly late August, you’ll draw almost every week,” he said, referring to stockpiles.
West Texas Intermediate for June delivery climbed $1.44, or 2.4%, to $60.37 a barrel at 10:08 a.m. on the New York Mercantile Exchange. The contract rose as far as $60.78, the highest since Dec. 11. The volume of all futures traded was 16% above the 100-day average for the time of day. Prices climbed 25% in April, the biggest monthly advance since May 2009.
Brent for June settlement added $1.29 to $67.74 a barrel on the London-based ICE Futures Europe exchange. The contract rose 21% in April, also the most since May 2009. The European benchmark crude was at a premium of $7.38 to WTI.
U.S. crude inventories increased by 1.2 million barrels through May 1, according to the Bloomberg survey. Stockpiles reached 490.9 million barrels in the week ended April 24, the Energy Information Administration said last week. That’s the highest level since 1930, based on monthly records dating to 1920.
Inventories at Cushing, the delivery point for WTI contracts, slid by 514,000 barrels to 61.7 million in the week ended April 24, EIA said. Crude inventories at the hub probably fell 200,000 barrels in the week ended May 1, according to a Bloomberg storage model.
EOG was among the fastest to respond to a crash in oil prices, as Chairman and CEO William Thomas in February announced plans to keep production flat this year and slash spending 40%.
The number of oil drilling rigs fell to 679 last week, the lowest level since 2010, according to Baker Hughes Inc. U.S. monthly oil production will decline from June through September before rebounding in the fourth quarter, according to EIA forecasts.
“Round numbers are always to be watched,” Olivier Jakob, managing director at Petromatrix GmbH, said by e-mail from Zug, Switzerland. “U.S. markets are getting excited about any hints of lower production or stock draws in Cushing.”
Saudi Arabia kept the discount at which it will sell Arab light crude to Asia in June at 60 cents to regional benchmarks, unchanged from May, state-owned Saudi Arabian Oil Co. said May 5. Aramco cut prices to a record low of $2.30 a barrel in March in a bid to retain market share in the region and has since narrowed the price differential.
“By keeping it unchanged, the Saudis are showing confidence that Asia is going to continue to buy oil,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “It’s a bullish sign for the market.”
Saudi Oil Minister Ali al-Naimi said in an interview on CNBC that he isn’t “worried at all” about the return of Iranian crude to the market if sanctions on the country are lifted as part of a deal on its nuclear program.
