Oil hits a one-month high near $55 a barrel on Wednesday as a drop in U.S. crude inventories raised hopes that OPEC-led supply restraint is clearing a glut, while an outage at a UK North Sea oilfield lent support.
U.S. crude inventories fell by a more-than-expected 1.8 million barrels last week, American Petroleum Institute data showed on Tuesday. The focus is now on whether the government’s supply report on Wednesday confirms the decline.
“Should it confirm that U.S. crude stocks did indeed fall for what would only be the second time this year, it will mark the start of a sustained tightening in U.S. crude supplies,” said Stephen Brennock of oil broker PVM.
Global benchmark Brent crude had risen 50 cents to $54.67 a barrel by 0837 GMT. It reached $54.80 intraday, the highest since March 8. U.S. crude was up 47 cents at $51.50.
Oil also gained after an outage at the 180,000-barrels-per-day Buzzard field in the North Sea. Buzzard is the largest field contributing to the Forties stream, the most important of the four crudes that underpin Brent.
An output cut from Jan. 1 led by the Organization of the Petroleum Exporting Countries has helped Brent recover from a 12-year low near $27 reached last year, although rising U.S. output and stubbornly high stocks have limited the rally.
OPEC and non-members including Russia that joined the deal to cut supply by about 1.8 million bpd for six months until June are considering whether to extend the agreement.
The inventory surplus is likely to be eroded, even without a prolonged supply cut, analysts at JBC Energy said.
“In the event of OPEC/non-OPEC not extending the cuts into the second half, the world would still continue to draw stocks at a mild pace of about 200,000 bpd until September, thereby lending support to prices one way or another,” JBC said.
Still, a rise in output in the United States – prompted in part by higher prices resulting from the OPEC-led cut – is likely to provide headwind for prices, analysts said.
U.S. drillers added oil rigs for an 11th week in a row, energy services firm Baker Hughes said on Friday, as energy companies boost spending on new production.