Oil advanced to the highest level in four months in New York as a surprise drop in U.S. crude inventories countered concern that the global economic recovery may falter and curb fuel demand.
West Texas Intermediate advanced as much as 0.7 percent to $94.87 a barrel, its highest intraday price since Sept. 19. WTI’s discount to Brent futures narrowed to less than $15 a barrel for the first time since July after the start of an expanded pipeline that is set to pare a glut in the U.S. Midwest. Crude supplies slid 951,000 barrels last week, Energy Department data showed. They were forecast to increase by 2.2 million, according to a Bloomberg survey.
“We may see oil demand picking up in the U.S. and this could support prices,” said Gerrit Zambo, an oil trader at Bayerische Landesbank in Munich, who predicts Brent may rise as high as $120 a barrel this quarter. “But the supply situation is comfortable.”
WTI for February delivery was at $94.76 a barrel, up 52 cents, in electronic trading on the New York Mercantile Exchange as of 12:19 p.m. London time. The contract climbed 96 cents to $94.24 yesterday, the highest close since Sept. 18.
Brent for March settlement on the London-based ICE Futures Europe exchange gained 64 cents to $110.32 a barrel. The European benchmark’s premium to WTI earlier narrowed to $14.98, the smallest gap July 25.
WTI dropped 7.1 percent in 2012 as the U.S. shale boom deepened a supply glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York contracts. That left it at an average discount of $17.47 a barrel to Brent last year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, advanced 3.5 percent last year.
Production of Forties crude, the North Sea’s most abundant grade, will climb to 407,143 barrels a day in February, the highest since March, a loading schedule obtained by Bloomberg News showed.
U.S. crude stockpiles fell to 360.3 million in the seven days ended Jan. 11, the Energy Department report showed yesterday. At the same time, supplies at Cushing climbed by 1.8 million barrels to a record 51.9 million
Gasoline inventories increased for an eighth week, the longest rising streak since March 2008, to 235 million barrels. That was the highest level since February 2011. Distillate-fuel supplies, including heating oil and diesel, advanced to 132.4 million, the highest since March, according to the data.
The Organization of Petroleum Exporting Countries is waiting to see how the European debt crisis will be handled to judge crude consumption, United Arab Emirates Oil Minister Mohamed Al-Hamli said at the World Future Energy Summit in Abu Dhabi yesterday. The group kept its 2013 global demand forecast at 89.6 million barrels a day, up 760,000 from 2012.
Demand is “not in good shape,” Al-Hamli said as OPEC released a report showing it reduced output to the lowest in more than a year. The organization will next meet in May to discuss output targets.
OPEC, which pumps about 40 percent of the world’s crude, reduced output by 465,000 barrels a day in December to 30.4 million, the slowest rate since October 2011, it said yesterday in its monthly report, citing secondary sources. That’s still 800,000 a day more than a daily average of 29.6 million that the group estimates it will need to pump this year.
To contact the reporters on this story: Yee Kai Pin in Singapore at email@example.com; Grant Smith in London at firstname.lastname@example.org
To contact the editor responsible for this story: Stephen Voss on email@example.com