Oil Prices Rise After API Data Confirms Surprise Fall in Crude Supplies

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Oil futures settled higher Tuesday as traders weighed the prospects for a decline in crude production, according to Bloomberg MarketWatch. The market also awaited the closely watched U.S. Energy Information Administration weekly report on crude supplies due Wednesday.

On the New York Mercantile Exchange, June West Texas Intermediate crude added $1.40, or 3.3%, to settle at $44.04 a barrel. That was the highest settlement of the year for a front month contract, but the June contract itself has finished higher—at $44.18 on April 20, when the May contract went off the board.

Brent crude, the global benchmark, rose $1.26, or 2.8%, to $45.74 a barrel on London’s ICE Futures Exchange.

“Prices are trying to stabilize as traders and oil companies try to predict when oil production will find equilibrium with demand,” said Phil Flynn, senior market analyst at Price Futures Group.

WTI prices fell 2.5% on Monday, trading roughly 0.6% higher week to date.

“Even with reports that the Saudis will complete the expansion of its Shaybah oil field by the end of May, raising the Saudis’ production capacity to 12 million barrels a day, it is possibly going to be wiped out” by falling output from producers who are not members of OPEC, said Flynn, in a Tuesday note. “With demand growth soaring, it may be only a matter of months before the oil market finds balance,” he said.

Saudi Arabia also announced an economic reform plan Monday, with a goal to reduce its dependence on oil.

Investors have been focusing on data out of the U.S. as a bellwether for the global market balance. U.S. output has been slowly declining in recent months, and is set to fall further as low prices hit drilling activity.

The American Petroleum Institute will release U.S. weekly petroleum supply data late Tuesday. The Energy Information Administration’s weekly report on inventories and production will be issued early Wednesday.

Analysts polled by Platts forecast an increase of 800,000 barrels for crude stockpiles for the week ended April 22. The American Petroleum Institute reported late Tuesday that crude supplies fell by 1.1 million barrels for the week ended April 22.

May natural gas ended at $2.032 per million British thermal units, down 3.1 cents, or 1.5%. The contract expires Wednesday.