Oil retreats on rise in U.S. crude stockpile

FUTURES

NEW YORK • Oil futures fell from the highest close in 17 months as an industry report was said to show U.S. crude stockpiles climbed last week.

Futures retreated US45 cents from the close after the American Petroleum Institute said late Tuesday that nationwide crude inventories rose 4.2 million barrels last week, according to a person familiar with the data. Analysts surveyed by Bloomberg project a government report Thursday will show a supply decline. West Texas Intermediate oil settled higher for an eighthstraight session, capping the longest stretch of gains in seven years as optimism mounts that major producers will make good on output-cut pledges in January.

“It looks like U.S. refineries sharply cut back on runs last week, which would explain the unexpected build in U.S. crude supplies and the fall in products,” Tim Evans at Citi Futures Perspective in New York, said by phone. “That’s what the American Petroleum Institute says, but that might not be what’s shown tomorrow in the weekly petroleum status report.”

Oil has climbed since the Organization of Petroleum Exporting Countries agreed last month to curb production for the first time in eight years, along with another 11 producing nations. The market is now shifting focus to the group’s compliance toward the targeted reductions. Money managers have reduced their bets on falling West Texas Intermediate crude prices to the lowest level since August, 2014, in anticipation of reduced supply. The rally has encouraged drilling of new wells in the U.S. shale patch.

WTI for February delivery traded at US$53.66 a barrel at 4:58 p.m. on the New York Mercantile Exchange, after touching US$53.61. Futures fell from a close at US$54.06, the highest since July 2, 2015. Total volume traded was about 50-percent below the 100-day average at 4:58 p.m. Prices are up 45 per cent this year.

Brent for February settlement rose US13 cents to US$56.22 a barrel on the London-based ICE Futures Europe exchange. It’s the highest close since July, 2015. The global benchmark tended the session at a US$2.16 premium to WTI.

The Energy Information Administration report on Thursday will probably show that U.S. crude stockpiles fell by 1.5 million barrels last week, according to a Bloomberg survey of analysts. Inventories of gasoline and distillate fuel, a category that includes diesel and heating oil, probably rose.

“The US$50 to US$60 area is the sweet-spot range for oil in 2017,” Cavan Yie, senior equity analyst at Manulife Asset Management Ltd. in Toronto, said by telephone. “There’s been talk of the U.S. production response defeating this rally, but I think the threat has been overstated.”