Oil extended gains to near $39 a barrel in New York, buoyed by an industry report of a surprise drop in US crude stockpiles and advances in other financial markets.
The American Petroleum Institute reported crude stockpiles declined by 9.52 million barrels last week, according to people familiar with the numbers. That contrasts with an increase forecast in a Bloomberg-compiled survey for government data due Wednesday. While the global economy is still expected to shrink this year, the slump won’t be as sharp as previously feared, according to the OECD.
Still, oil investors are processing a slew of bearish calls this week. The International Energy Agency warned on Tuesday that the outlook is “even more fragile” due to a resurgence of the coronavirus. That followed weak demand forecasts from BP Plc, Trafigura Group and OPEC. On the other hand, trading giant Vitol Group was more upbeat, saying inventories will likely fall even further this year.
Oil’s rally from an April rout has stalled this month, with rising virus infections raising doubts about a sustained recovery in demand, while supply has increased. A committee made up of some ministers from the Organization of Petroleum Exporting Countries and its allies will meet on Thursday to discuss if the group’s production curbs are enough to prevent a glut.
“The oil market’s upward momentum this morning is primarily driven by the surprise draw in US crude stocks,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. “The economic recovery will continue globally, albeit unevenly, and if OPEC stays the course the market will re-balance, deflating excess inventories built during the first half of the year.”
OPEC and its allies may have to address the issue of compliance again at its gathering. The United Arab Emirates almost entirely disregarded its commitment to production quotas last month when it opened the taps even further, the IEA said in a report Tuesday.
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