(Bloomberg) -- Oil closed at its highest since December 2014 as signs mount that dwindling U.S. stockpiles are contributing to a tightening global market.
Futures in New York jumped 1.4 percent on Tuesday. Crude inventories held in U.S. terminals and tanks last week probably fell for a 10th week. That would be the longest stretch of declines in at least three decades, if government data on Wednesday confirms it.
Underpinning the price rally were also assurances from Russian and Saudi Arabian oil chiefs that a historic production accord by the world’s largest producers will endure. BBL Commodities LP, one of the world’s largest oil-focused hedge funds, believes Brent futures, the London-traded benchmark, will climb to $80 this year as stockpiles drop rapidly on OPEC’s curbs.
“You are seeing a rebalancing of the oil market,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “We’ve had outsized inventory declines for the last little while.”
Prices are poised to reach $65 a barrel in New York and $70 in London as the Organization of Petroleum Exporting Countries and allied producers curb output for a second straight year. Refiners and exporters in the U.S. have turned to storage to acquire supplies, accelerating the reduction of the global glut.
The comments from Saudi Arabia and Russia quell investors’ “concerns about OPEC discipline deteriorating. That should be welcome news,” Paul Crovo, a Philadelphia-based oil and equity analyst at PNC Capital Advisors LLC, said by telephone. “Inventories continue to go down. That’s all good news.”
West Texas Intermediate for March advanced 90 cents to settle at $64.47 a barrel on the New York Mercantile Exchange. Total volume traded was about 11 percent below the 100-day average. The February WTI contract expired Monday.
Brent for March settlement surged 93 cents to end the session at $69.96 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.49 to WTI.
U.S. crude inventories probably fell by 2 million barrels last week, according to a Bloomberg survey of analysts. Stockpiles are sitting at the lowest level since February 2015, while oil production ticked higher in last week’s government report.
Inventory figures will be released by the Energy Information Administration on Wednesday, while tallies from the industry-funded American Petroleum Institute will be released later Tuesday.
Oil-market news:
- Libya’s Sara oil fields were said to increase output to 50,000 barrels a day after resuming pumping on Sunday, according to a person familiar with the situation.
- The International Energy Agency probably will make an upward revision to its U.S. production outlook and a downward shift in its Venezuelan supply forecast, Executive Director Fatih Birol said in an interview in Davos.
- OPEC is more focused on the price of oil and short-term revenues rather than curbing inventories to their five-year average, Citigroup (NYSE:C) analysts wrote in a report.
