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Oil near $50 set for biggest weekly gain since August on demand

Oil prices
Oil prices

Oil headed for the biggest weekly gain since August amid speculation an increase in demand will ease a global glut.

Futures climbed as much as 1 percent in New York and are up 9.4 percent this week. A “new capital discipline” in the industry will allow consumption to catch up with supply, boosting prices, Gary Ross, the founder and chairman of PIRA Energy Group, said Thursday.

World oil use will expand more than forecast this year, according to Abdalla Salem El-Badri, the secretary-general of the Organization of Petroleum Exporting Countries.

Oil traded above $50 a barrel Thursday for the first time since July on signs rising demand will trim the surplus that drove prices to the lowest level in six years. Federal Reserve minutes indicated policy makers won’t rush to lift interest rates, sending the dollar lower and making commodities priced in the U.S. currency more attractive.

“West Texas is approaching a key resistance level at $50 and sustained trading over that point would be a very positive development for oil,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “We’ve had a period of basing behavior that suggests prices have seen the bottom.”

West Texas Intermediate for November delivery advanced as much as 47 cents to $49.90 a barrel on the New York Mercantile Exchange and was at $49.84 at 2:52 p.m. Sydney time. The contract added $1.62 to $49.43 on Thursday. The volume of all futures traded was about 36 percent above the 100-day average.

Brent for November settlement gained as much as 41 cents, or 0.8 percent, to $53.46 a barrel on the London-based ICE Futures Europe exchange. It has increased 11 percent this week. The European benchmark crude traded at a premium of $3.61 to WTI.

A key driver for rising oil prices will be the lack of spare production capacity, according to Ross, who predicted last year’s rout before turning bullish in 2015. It will take the U.S. shale industry at least nine months to boost output after crude climbs to more profitable levels, he said at a PIRA seminar in New York.

Global consumption will expand by 1.5 million barrels a day this year, El-Badri said in a statement to an International Monetary Fund committee. The market has a supply overhang of about 200 million barrels, he told an industry conference in London this week.

Sixteen of 41 traders and analysts were bullish on WTI in a Bloomberg survey on Thursday. Eleven were bearish while 14 were neutral.

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