Oil holds gains near two-week high after US stockpiles tumble

This photo taken on January 21, 2016 shows a pumpjack on the outskirts of the oil town Midland, Texas at dawn. (AFP Photo/Spencer Platt)

Oil held gains near the highest close in more than two weeks after government data showed crude stockpiles in the world’s largest economy slid more than forecast to a two-year low.

Front-month futures were little changed in New York after prices climbed 1.6 percent over the previous two days. Government data Wednesday showed US inventories fell 6.5 million barrels last week – more than double the average estimate in a Bloomberg survey – to the lowest level since 2015. Still, global stockpiles won’t be “ anywhere close” to the level targeted by OPEC when it meets in June, Saudi Arabian Minister Khalid Al-Falih said in an interview.

Oil is heading for a second yearly advance after the Organization of Petroleum Exporting Countries and its allies including Russia decided to prolong production curbs through the end of 2018, with the goal of returning global stockpiles to their five-year average. Inventories will remain below seasonal levels and continue to shrink through the second quarter of next year, according to Goldman Sachs Group Inc.

“Larger-than-expected declines in US crude inventories and comparably small gains in stockpiles of refined products including gasoline are putting upward pressure on oil,” said Hong Sungki, a commodities trader at NH Investment & Securities Co. “We may continue to see draw-down in stockpiles until January and that can keep prices high.”

West Texas Intermediate for February delivery was at $58.02 a barrel on the New York Mercantile Exchange, down 7 cents, at 1:27 p.m. in Seoul. Total volume traded was about 62 percent below the 100-day average. The contract gained 0.9 percent to $58.09 Wednesday, the highest close since Dec. 1.

Brent for February settlement lost 16 cents to $64.40 a barrel on the London-based ICE Futures Europe exchange after adding 1.2 percent Wednesday. The global benchmark traded at a premium of $6.38 to WTI.

US crude inventories slipped to 436.5 million barrels last week, while oil exports jumped by 772,000 barrels a day, the biggest increase on record, the EIA said on Wednesday. Meanwhile, gasoline stockpiles climbed 1.24 million barrels, the smallest gain in four weeks, and distillate supplies increased by 769,000 barrels.

Oil-market news:

Oil demand may jump in the new year as US refiners plan to take fewer units offline than last winter, freeing them up to churn out more fuel. Saudi Aramco’s IPO is moving ahead and all options are open on where to list shares of the giant oil producer, the country’s finance minister said. – Bloomberg

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