December 21, 2016 10:00 AM, EST

Oil Extends Gains as Industry Report Shows US Stockpile Drop

Patrick T. Fallon/Bloomberg News

Oil extended its advance as industry data showed U.S. crude stockpiles declined last week.

February futures rose as much as 0.9% in New York after climbing 0.5% on Dec. 20. Crude inventories dropped by 4.15 million barrels, the American Petroleum Institute was said to report. That compares with a forecast 2.5 million-barrel decrease expected in the Dec. 21 Energy Information Administration report. Libya reopened two of its biggest oil fields and is set to load the first crude cargo in two years from its largest export terminal.

Oil has traded near $50 a barrel since the Organization of Petroleum Exporting Countries agreed Nov. 30 to cut output for the first time in eight years. Non-OPEC producers including Russia also will trim supply.

U.S. crude inventories are at the highest seasonal level since the EIA began compiling weekly data in 1982. Stockpiles have dropped during December in nine of the past 10 years as refineries on the Gulf Coast minimized supply to reduce tax bills.

"We should see another decline in inventories because the tax rules mean it costs refiners a lot to have excess supply," Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $6.1 billion, said by telephone. "This time of year, the big question in the market is how low inventories will get before they start to grow in the new year."

West Texas Intermediate for February delivery rose 10 cents to $53.40 a barrel at 9:38 a.m. Dec. 21 on the New York Mercantile Exchange. The January contract expired Dec. 20. Total volume traded was about 30% below the 100-day average.

U.S. Stockpiles

Brent for February settlement slipped 6 cents to $55.29 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.89 premium to WTI.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, increased by 609,000 barrels in the week of Dec. 12, the API reported Dec. 20, according to a person familiar with the data.

Oil-market news:

• Pipelines connecting the Sharara oil field in Libya to the Zawiya refinery and the El-Feel field to the Mellitah energy complex reopened at the town of Rayayina, according to a statement by the state-run National Oil Corp.

• Kuwait Petroleum Corp. will cut contracted volumes to customers around the world, including some in the United States, according to a company official who asked not to be identified because contracts are a private matter.