Oil hits highest since
June on possible U.S. inventory drop
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[October 05, 2016]
By Alex Lawler
LONDON
(Reuters) - Oil rose towards $52 a barrel on Wednesday, hitting its
highest since June, supported by an industry report that U.S.
inventories probably fell for a fifth straight week and OPEC's deal to
cut supply.
The American Petroleum Institute (API) said on Tuesday that U.S. crude
inventories dropped 7.6 million barrels, which would be the fifth
straight weekly decline if confirmed by U.S. Energy Information
Administration (EIA) data on Wednesday. [API/S]
Brent crude was trading at $51.74 a barrel, up 87 cents, at 0948 GMT.
The global benchmark touched $51.81 during the session, its highest
since June 10. U.S. crude was up 81 cents at $49.50.
Another drop in U.S. crude stocks would reinforce the view that the
supply glut that has been weighing on prices since 2014 is easing. The
API data, however, does not always tally with the EIA data, which is due
at 1430 GMT. Analysts expect a rise in crude stocks of 2.6 million
barrels.
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"If the (EIA) can confirm the API statistics and help crude oil break
away from the resistance of the high of August, then crude oil will have
to start targeting the high of June," said Olivier Jakob, analyst at
Petromatrix.
Jeffrey Halley, senior market analyst at brokerage OANDA in Singapore,
said another confirmed drawdown in crude stocks would likely push U.S.
crude above $50.
Brent has risen from below $49 on Sept. 28, when the Organization of the
Petroleum Exporting Countries agreed a surprise cut in its output to
support prices which are less than half the level of mid-2014.
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![](../images/100516pics/busine22.jpg)
Crude oil storage tanks are seen from above at the Cushing oil hub
in Oklahoma, U.S., March 24, 2016. REUTERS/Nick Oxford/File Photo
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Under the deal, OPEC will target production of between 32.50 million
barrels per day (bpd) and 33.0 million bpd, implying a cut of as much as
740,000 bpd from the August level, as reported in OPEC's monthly report.
[OPEC/M]
The
move marked an about-face by OPEC, which in November 2014 dropped its role of
cutting production. Although it hasn't yet worked out all the details, and
analysts are sceptical the cut will be implemented, the deal is supporting the
market.
"The mere threat of a production cut should put a floor under oil prices until
the next OPEC meeting on Nov. 30," said Jason Gammel of U.S. investment bank
Jefferies.
(Additional reporting by Henning Gloystein; editing by David Clarke and Elaine
Hardcastle)
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