Oil Prices Settle Higher After IEA Report
13 May 2016 - 5:40AM
Dow Jones News
Oil prices climbed Thursday in a volatile session, thanks to a
widely watched report from an international energy monitor that
suggested the oil markets are tightening faster than some
expected.
Light, sweet crude for June delivery settled up 47 cents, or 1%,
to $46.70 a barrel on the New York Mercantile Exchange. Brent, the
global benchmark, climbed 48 cents, or 1%, to $48.08 a barrel on
ICE Futures Europe. Oil bounced in and out of positive territory
for much of the session before gaining some momentum in the
afternoon.
Oil's recent rally has pushed long-term prices above $50 a
barrel, which could spur more producers to sell output and keep the
market well supplied, brokers and an analyst said. Markets for
gasoline and diesel are also coming off their strongest two-day
rally in months, making them ripe for bullish traders to cash out
their gains, a broker said.
The International Energy Agency on Thursday issued a report
widely seen as bullish but that also warned that global stocks are
likely to keep rising through the first half of the year despite
already high levels. The monthly report from the Paris-based IEA
said global oil stocks would continue to increase in the first half
of the year as Iran ramps up its production, adding to the nearly
two years of oversupply that saw prices dropping to decade
lows.
The market had been in one of its biggest downturns in a
generation just before the recent rally, and many believe it is
still prone to falling because oversupply has waned so little.
The IEA said the rise in Iran's oil production and exports after
the lifting of international sanctions has been faster than
expected. Iran increased daily oil output by 300,000 barrels in
April to 3.56 million barrels a day, a level last achieved in
November 2011.
Combined output of the Organization of the Petroleum Exporting
Countries climbed last month to 32.76 million barrels a day, the
highest since April 2008.
"The market remains awash with oil," said Norbert Ruecker, head
of commodities research at Julius Baer. Recent supply "disruptions
are temporary, and we believe that support to price should remain
short-lived."
Production outside the oil cartel continues to decline, the IEA
said, led by a falling output in the U.S. It added that recent
outages in Nigeria, Ghana and Canada have exceeded 1.5 million
barrels a day so far.
The International Energy Agency said global oil stocks would
experience a drastic reduction in the second half of the year on
the back of strong demand and falling supply by some major
producers. Strong demand gains in India, China and Russia, combined
with U.S. demand that set records in March, are dispelling any
belief that demand might be a problem for the market, said Tim
Rudderow, president of Mount Lucas Management, which oversees $1.6
billion.
"Demand is solid world-wide," he added. "Even in the U.S., we
have given up on high-mileage [per gallon] cars and jumped back
into our trucks and SUVs."
In the U.S., crude-oil stockpiles defied analysts' expectations
by dropping 3.4 million barrels in the week ended May 6, data from
the Energy Information Administration showed on Wednesday. While
inventories remain near the highest levels in more than 80 years,
investors are taking comfort in the steady decline in U.S.
production. EIA data show that U.S. crude output fell last week to
the lowest level since September 2014 to 8.8 million barrels a
day.
Gasoline stockpiles also decreased by 1.2 million barrels and
distillate stocks—including heating oil and diesel—by 1.6 million
barrels, both about double expectations.
Summer Said and Jenny W. Hsu contributed to this article.
Write to Timothy Puko at tim.puko@wsj.com and Georgi Kantchev at
georgi.kantchev@wsj.com
(END) Dow Jones Newswires
May 12, 2016 15:25 ET (19:25 GMT)
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