With U.S. crude supplies seeing their biggest weekly decline so far this year, oil futures rose Wednesday to their highest level in more than four months.
West Texas Intermediate crude for August delivery rose 91 cents or 2.3% on the New York Mercantile Exchange and finished the day at $41.20 a barrel. September Brent crude, considered the global benchmark was up 89 cents or 2.2% and ended the day at $43.79 a barrel on ICE Futures Europe.
Both WTI and Brent crude marked the highest front-month contract settlements since March 6, according to Dow Jones Market Data.
Prices finished up even as an OPEC committee reached an agreement to ease off record production cuts starting next month.
“Any move OPEC+ made to ease the production cuts would be of some concern, but…improving market conditions, plus the pledge that some members would compensate for earlier overproduction, [have] helped to ease market fears,” Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch.
At the Joint Ministerial Monitoring Committee meeting Wednesday, the Organization of the Petroleum Exporting Countries and allied producers, collectively known as OPEC+, said they will ease record production cuts of 9.7 million barrels per day to 7.7 million barrels per day starting in August through the end of the year amid signs of improvement in the oil market.
Participants in the deal who were unable to fully comply with the reductions in May and June, which include Iraq, will compensate for the added output. Including that compensation, Saudi Energy Minister Prince Abdulaziz bin Salman said actual cuts will be at roughly 8.1 million to as much as 8.34 million barrels per day. An OPEC+ document seen by S&P Global Platts, however, showed that 13 countries pumped above their quotas in the first two months of the deal by a combined 840,000 barrels per day.
Although “laggards are set to deepen cuts” August and September to make up for “falling short their past target, we find unlikely that they will be able to achieve 100% of compliance,” said Paola Rodriguez-Masiu, senior oil markets analyst at Rystad Energy, in a market update. “In the case of Iraq, we believe that the target set to compensate the alliance is overambitious given Iraq’s dire economic need for oil revenues right now.”
In the U.S. Wednesday, the Energy Information Administration reported that domestic crude inventories fell by 7.5 million barrels for the week ended July 10. That compared with a forecast by analysts polled by S&P Global Platts for an average decline of 2.1 million barrels. The American Petroleum Institute on Tuesday reported a drop of 8.3 million barrels.
“A huge drop in imports has yielded the biggest draw to oil inventories since the last week of last year,” said Matt Smith, director of commodity research at ClipperData.
Locally, SandRidge Energy shares were up 8 cents or 6.20% to finish the day at $1.37. Devon Energy finished up 31 cents or 2.97% and ended at $10.74 a share.
ConocoPhillips added 31 cents or about 1% to reach $41.62 while EOG Resources rose 18 cents and ended at $47.46 a share.
Marathon Oil was up 6% or 32 cents to end the day at $5.69. ONEOK also added 6% or $1.61 a share to reach s$28.83.
Phillips 66 rose $3.50 or 6% to hit $65.45.
On the Utilities Sector, American Electric Power fell 67 cents or about 1% to settle at $84.68 per share.