Oil Rises to Highest Since 2014 on Bullish US Inventory Report

Brent Crude

Brent Crude

On Wednesday, the US Energy Information Administration released a reportshowing oil inventories in the US fell by 1.1 million barrels last weekto about 428 million barrels.

US crude oil exports rose by 544,000 barrels a day last week, and USA production rose by 15,000 barrels a day to 10.54 million.

The EIA reported USA crude stockpiles dropped 1.07 million barrels last week, while supplies at the Cushing, Oklahoma, pipeline hub dropped by 1.12 million.

Brent for June settlement climbed $1.90 to end the session at $73.48 on the London-based ICE Futures Europe exchange.

At current levels, futures are approaching levels not seen since Thanksgiving of 2014, when OPEC refused to take steps to stop a decline in oil prices, sparking an even sharper drop.

Recent signals that OPEC could extend supply cuts into next year are also pushing prices up. USA crude rose 0.73 percent to $68.97.

Opec, which has been curbing output by 1.8 million barrels a day since January 2017, will need to "over-tighten the market rather than under-tighten the market", to keep USA shale from flooding the sector, said Michael Tran, managing director, global energy strategy at RBC Capital Markets in an interview with The National in Abu Dhabi. The group's goal of reducing global stockpiles to their five-year average is almost reached, according to people with knowledge of the data. A committee that monitors adherence to the cuts meets in Saudi Arabia on Friday, and the wider group will gather in June to determine whether the agreement should be adjusted. Analysts including investment bank JP Morgan had predicted that oil prices could rise as high as $80 per barrel this year.

Also supporting prices is an expectation that the United States will re-introduce sanctions against OPEC-member Iran, which could result in further supply reductions from the Middle East.

The weekly measurement on demand may be "overstated", but "suggests that some driving season weeks in 2018 will see more than 10 million [barrels a day] in gasoline demand, unless there is a disincentive tied to a much more radical increase in gas prices", said Kloza.

Aluminium prices reached their highest since 2011, its raw material alumina touching an all-time peak before retreating when Russian Federation floated the idea of a temporary nationalisation of sanctions-hit giant Rusal.

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