On Thursday the oil prices rose after the U.S. data showed a surprising declining in inventories, suggesting a global oversupply could be ending following moves by OPEC to place a cut in production.
The Benchmark Brent crude oil (LCOc1) rose by 70 cents a barrel to {currency}56.54 by 08:55 GMT (03:55 AM ET), recovering from a decrease of 82 cents on Wednesday. U.S. light crude (CLc1) rose by 70 cents to {currency}54.29 per barrel.
Both of the benchmarks are approaching to the top of relatively narrow ranges of {currency}4 that have contained the trade so far this year, a reflection of the period of low volatility since the Organizations of the Petroleum Exporting Countries and other exporters reached an agreement to cut output.
OPEC and producers, including Russia, are aiming to reduce the production by approximately 1.8 million barrels per day (bpd) in an attempt to drain the oversupply that has kept the prices down for over two years.
So far, the OPEC seems to be sticking to its deal but the other producers, especially U.S. shale companies, have increased the output, which is assisting in expanding stocks in the United States, the largest consumer of oil in the world.
On Wednesday, the industry data indicated U.S. crude inventories dropped by 884,000 barrels in the week to February 17 to 512.7 million, in comparison to the analyst expectations for a rise of 3.5 million barrels.
Tamas Varga, an analyst at London brokerage PVM Oil Associates, noted that oil prices could rally more if the U.S. government’s Energy Information Administration (EIA) also reports a drop in inventories when its data is published on Thursday at 11 a.m. EST (16:00 GMT).
Varga said, “If the EIA confirms the U.S. stock draws, we could see the market increase much higher.”
Yet Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo, stated that the market needed to see that the stocks outside of the U.S. were also dropping for prices to break out of their trading ranges.
“It is a battle between how fast the OPEC can cut without the shale catching up,” according to Nunan, about U.S. drilling in shale formations that has indicated an improvement this year.
“What the OPEC actually needs to do is to get the inventories down.”
Eleven non-OPEC oil producers that joined the OPEC deal have presented at least 60 percent so far of the curbs that were promised, according to OPEC sources on Wednesday, higher than was initially estimated.
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