Oil headed toward its highest close in over a week as industry data was said to show a larger-than-expected drop in U.S. crude stockpiles.
February futures in New York added 0.4 percent after gaining 0.6 percent Tuesday. Inventories fell 5.2 million barrels last week, the American Petroleum Institute was said to report, suggesting further tightening in a market already facing the shutdown of a key North Sea pipeline. The drop is bigger than estimates for government data due on Wednesday, which is forecast to show supplies shrank by 3.15 million barrels.
Oil is heading for a second yearly gain as the Organization of Petroleum Exporting Countries and its allies including Russia prolong supply curbs through the end of 2018 with the aim of bringing global inventories down to a five-year average. The market will have re-balanced by mid-2018, fast-forwarding OPEC’s exit from the cuts to the second half of the year, according to Goldman Sachs Group Inc.
“The conditions for a tight first quarter are drifting into place,” said Amrita Sen, chief oil analyst at consultants Energy Aspects Ltd. in London.
West Texas Intermediate for February delivery was at $57.79 a barrel on the New York Mercantile Exchange, up 23 cents, at 1:21 p.m. in London. Total volume traded was about 63 percent below the 100-day average. The January contract added 30 cents on Tuesday to expire at $57.46.
Brent for February settlement added 11 cents to $63.91 a barrel on the London-based ICE Futures Europe exchange after rising 39 cents on Tuesday. The global benchmark crude traded at a premium of $6.11 to WTI.
U.S. crude inventories would have fallen for a fifth week if the Energy Information Administration data confirms a decline on Wednesday. Gasoline stockpiles climbed by 2 million barrels last week, the API was said to report. Distillate supplies dropped by 2.85 million barrels, which would be the largest decline since early November if replicated in the EIA data.