Crude tops $51 as US inventory falls, China demand looks promising
London (Jun 8) Oil prices reached fresh highs on Wednesday after data from an industry group showed a decline in U.S. crude stockpiles and figures out of China indicated strong demand.
U.S. oil prices settled above $50 a barrel Tuesday for the first time since July. Crude has nearly doubled in value since hitting decade-lows earlier this year as production disruptions and falling U.S. output have taken barrels off the oversupplied global market.
Brent crude LCOQ6, +1.52% , the global oil benchmark, rose 1.4% to $52.19 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures CLN6, +1.35% were trading up 1.4% at $51.07 a barrel.
“Continued supply disruptions in Nigeria as well as a draw in U.S. crude oil inventories and increased Chinese oil imports” were supporting prices on Wednesday, said Michael Poulsen, oil analyst at Global Risk Management.
The American Petroleum Institute, an industry group, said late Tuesday that U.S. crude supplies decreased by 3.6 million barrels last week. The U.S. Energy Information Administration will publish its official data later on Wednesday. Analysts polled by The Wall Street Journal expect the data to show a 3.1 million barrel fall in stockpiles.
Meanwhile, data out of China showed that oil imports stayed strong in May. China is the world’s second largest oil consumer and news about its economy often sways the market.
While oil imports fell over the month due to planned refinery outages, they rose around 40% compared with the same month in 2015. Chinese oil imports in the first five months of the year, combined, were 16% up on the same period last year, according to Commerzbank.
In Nigeria, the militant group Niger Delta Avengers has vowed to shutter the country’s oil operation. Multiple attacks on key pipelines and facilities have reduced Nigeria’s daily oil output to around 1 million barrels.
Production in the U.S. also continues to decline as companies have curbed investments due to the price rout. The Energy Information Administration said Tuesday that domestic crude production in May averaged 8.7 million barrels a day, down about 1 million barrels a day from its peak in April last year.
But as prices rise above $50, analysts say that some U.S. shale producers could start to increase their output, flooding the still well-supplied market with more crude. The number of rigs drilling for oil in the U.S. rose by nine last week, the first increase in 11 weeks, Baker Hughes Inc. said Friday.
Nymex reformulated gasoline blendstock RBN6, +1.14% — the benchmark gasoline contract — fell 0.2% to $1.58 a gallon. ICE gasoil changed hands at $461.75 a metric ton, up $5.25 from the previous settlement.