London: Oil headed for a second weekly advance as US crude production continued to decline and firefighters defended Canadian oil-sands operations from wildfires.
Futures were little changed in New York, bringing their weekly gain to about 4.1 per cent. Prices were supported as global equities rebounded, with the Stoxx Europe 600 Index rising 0.9 per cent as of 1:01pm. London time. US output slid for a 10th week to the lowest since September 2014 as gasoline use increased before a period of higher seasonal demand, the Energy Information Administration said Wednesday.
Oil has surged more than 80 per cent since slumping to the lowest in 12 years in February on signs the global glut will ease as US production falls. The market moved into a deficit earlier than expected following supply disruptions in Nigeria and an increase in demand, according to Goldman Sachs Group Inc
“Oil is back to testing the $50 levels as the focus shifts back to global supply disruptions,” Michael Poulsen, an analyst at Global Risk Management Ltd, said in a report. “Due to the low oil prices, a large number of US shale oil producers have limited or halted production. The big question now is at what price level will the shale oil drillers go back online?”
West Texas Intermediate for June delivery, which expires Friday, rose as much as 63 cents, or 1.3 per cent, to $48.79 a barrel on the New York Mercantile Exchange and traded for $48.14 at 1:01pm. London time. Total volume traded was about 20 per cent below the 100-day average. The more-active July contract slid 8 cents to $48.59.
Brent for July settlement climbed as much as 58 cents, or 1.2 per cent, to $49.39 a barrel on the London-based ICE Futures Europe exchange. The contract is up 1.6 per cent this week, heading for a second weekly advance. The global benchmark crude was at a premium of 6 cents to WTI for July.
Firefighters successfully defended Suncor Energy Inc and Syncrude Canada Ltd’s oil-sands operations and rain brought some relief, while the blaze spread into remote forests to the east. The respite renews the prospects for a restart of operations after higher temperatures and winds had sent the blaze back to the heart of the oil sands earlier this week.
US production fell to 8.79 million barrels a day last week, according to EIA data. Gasoline consumption averaged 9.56 million barrels a day in the four weeks ended May 13, the highest seasonal level in at least a decade. Nationwide crude stockpiles unexpectedly increased, keeping them near the most in more than eight decades.