Oil hits new high amid drain in supply
Hopes up that OPEC will solidify a deal to cap production
Plunging U.S. inventories of crude oil boosted the commodity to its highest level in intraday trading in 15 months.
West Texas Intermediate crude, the U.S. benchmark, was up 2.9% to $51.74 at 11:16 a.m. after the U.S. Energy Information Administration released its weekly report on oil stocks.
The commodity hasn’t closed above $52 a barrel since July 14, 2015, according to the Oil Price Information Service.
One key catalyst on Wednesday was the EIA’s estimate that commercial crude oil inventories fell by 5.2 million barrels in the week ended Oct. 14.
Although “crude oil inventories are near the upper limit of the average range for this time of year,” EIA said in a report, any sign of a contraction in stocks fuels a perception that the commodity is stabilizing at sustainable levels for producers.
Oil has rallied in recent weeks on hopes that the Organization of the Petroleum Exporting Countries is set to solidify a budding deal to cap production at 32.5 million barrels a day to 33 million barrels a day.
The commodity remains in what OPIS analyst Tom Kloza called a “pre- OPEC meeting honeymoon.”
What’s more, evidence is building that non- OPEC producers are poised to join the accord.
Still, many producers that were sidelined when oil briefly tumbled below $30 a barrel this year are eager to get back into the game. U.S. producers have added 116 oil rigs since the industry’s low point on May 27, representing a 37% increase, according to Goldman Sachs.
The effect of oil’s rise on gasoline prices has been noticeable. Kloza projected that this weekend, for the first time since July 13, 2013, gas prices will be higher than they were a year earlier.