Oil closed at its highest in five weeks on Wednesday after the International Energy Agency and OPEC improved their outlooks for demand.
Futures gained 2.2 percent in New York. The IEA sees global oil demand rising this year by the most since 2015, while OPEC boosted projections for consumption in Europe and China. Plus, the cartel and its allies are said to be considering an extension of their output-cut deal. In the U.S., refineries are set to process more crude as they come back online after Hurricane Harvey led gasoline inventories to tumble the most on record last week.
The IEA’s stronger demand estimate have helped lift oil prices, Matthew Beck, managing director of a $8 billion oil and natural gas bond and private-equity portfolio at John Hancock Financial Services Inc. in Boston, said by telephone. At the same time, “there has been a fair bit of OPEC rhetoric in the market the last few days of potentially extending cuts and focusing on reducing exports, which would all be positive.”
Oil in New York has closed below $50 a barrel since July as efforts to drain a global glut by the Organization of Petroleum Exporting Countries and partners including Russia confront rising shale output. One option that OPEC and its allies are considering is a six-month extension to supply curbs from the end of March, according to a person familiar with the matter.
Compliance with the cartel’s deal to reduce production was 94 percent in August, up from a revised 85 percent in July.
“It looks like we are turning the corner,” Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago, said by telephone. “There’s more of a bullish mood out there.”
West Texas Intermediate for October delivery rose $1.07 to settle at $49.30 a barrel on the New York Mercantile Exchange. Total volume traded was about 15 percent above the 100-day average.
The S&P 500 Energy Index climbed as much as 1.3 percent, with Chesapeake Energy Corp. jumping 8 percent, while Pioneer Natural Resources Co. and Devon Energy Corp. gaining more than 3.5 percent.
Brent for November settlement increased 89 cents to end the session at $55.16 on the London-based ICE Futures Europe exchange., the highest level since April. The global benchmark crude traded at a premium of $5.41 to November WTI.
Brent’s large premium over the U.S. benchmark “is the most telling signal that U.S. crude oil markets need more time to return to normal in the wake of Hurricane Harvey,” IHS Markit Ltd said in a note Wednesday.
OPEC members are discussing prolonging their production cuts ahead of a ministerial meeting scheduled for late November in Vienna, with a three-month extension seen as the minimum, the people said. The duration will depend on multiple variables, including the level of compliance, the pace of the output recovery in Libya and Nigeria, U.S. shale supply and the strength of global demand.
Amid refinery disruptions, nationwide gasoline stockpiles slid by 8.43 million to 218.3 million barrels last week, the lowest level since December 2015, a report Wednesday from the Energy Information Administration showed. At the same time, crude inventories climbed by 5.89 million barrels to 468.2 million, while refinery utilization sank. Cushing, Oklahoma supplies rose by the most since March, while oil production climbed by the most since 2012.
“Storage data is going to continue to be choppy, as it was this week, for the next few weeks,” Beck said. “We expect crude prices to be stuck in somewhat of a holding pattern until we have Gulf Coast refineries brought back to full capacity.”
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