Crude Rises to Four-Week High as U.S. Supplies Seen Declining

(Bloomberg) -- Crude rose to a four-week high on forecasts that U.S. supplies fell and reports of a North Sea oil-field shutdown.

Futures advanced 1.6 percent in New York, as market observers prepared for a U.S. Energy Information Administration release on stockpile figures Wednesday. The price climbed from the close after the industry-funded American Petroleum Institute was said to report that crude stockpiles shrank by 1.83 million barrels. A Bloomberg News survey of analysts found U.S. crude supplies were expected to have declined 150,000 barrels last week.

"There's an expectation, one that I don't share, that the EIA and API will report crude draws," Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by telephone. “Gasoline inventories are supposed to continue to draw."

Oil rose 5.5 percent last week, the most since December, after Kuwait and other members of the Organization of Petroleum Exporting Countries joined with Oman to voice support for an extension of the six-month output cuts that began in January. OPEC Secretary-General Mohammad Barkindo said Sunday that he is “cautiously optimistic that the market is already rebalancing,” even as the number of active oil rigs in the U.S. rose to the highest since September 2015 and Libya was said to restore production.

The Buzzard oil field shut Tuesday after an unplanned outage, according to person with knowledge of the matter. West Texas Intermediate for May delivery rose 79 cents to $51.03 a barrel on the New York Mercantile Exchange. That was the highest close since March 7. Total volume traded was about 9 percent below the 100-day average. May futures traded at $51.15 at 4:49 p.m. after the API report.

Buzzard Shutdown

Brent for June settlement rose $1.05, or 2 percent, to $54.17 a barrel on the London-based ICE Futures Europe exchange. It was also the highest close since March 7. It ended the session at a $2.66 premium to June WTI.

The global benchmark advanced more than WTI following the reports of the Buzzard field shutdown. The field operator, Cnooc Ltd.'s Nexen unit, didn't reply to an email seeking comment.

David Pursell, a managing director at investment bank Tudor Pickering Holt & Co., sees crude reaching $65 a barrel in the fourth quarter and $75 in 2019. He expects a big drawdown in inventories over the next eight weeks and said stockpiles will revert to normal levels by the end of the third quarter.

"Prices are going to get better, and you can take that to the bank," Pursell said at Hart Energy's DUG Permian Basin conference in Fort Worth, Texas.

Leaving Storage

Since mid-February, between 10 million and 20 million barrels have left storage in the Caribbean, according to estimates from traders who asked not to be named because their data is proprietary. The decline, hardly noticed by most in the market, reflects the impact of the OPEC-led output cuts.

See also: Buhari's change of tack in Nigeria delta boosts oil output

Crude output by OPEC members fell by 200,000 barrels a day in March, helped by cuts in Nigeria and Libya that aren't part of a production-curbing accord, a Bloomberg News survey shows. The group pumped 32.095 million barrels a day last month, based on information compiled from analysts, oil companies and ship-tracking data. Among the 10 members bound by output caps, compliance weakened to 89 percent of pledged reductions from 104 percent.

OPEC will meet May 25 in Vienna to make a decision on whether to extend production cuts.

Oil-market news:

• Canadian crude shipments to the U.S. are poised to shrink just as the effects of OPEC-led output cuts are being felt in the Caribbean. That's good news for Mexico and other local oil producers.
• The oil industry's bankers aren't ready to rein in the shale boom just yet.

--With assistance from Joe Carroll

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Carlos Caminada, Debarati Roy