NEW YORK (Reuters) - Oil prices settled up about 2 percent on Wednesday, hitting their highest since June, after the fifth unexpected weekly drawdown in U.S. crude inventories added to support on hopes that major producers will agree to cut output next month.
The U.S. Energy Information Administration (EIA) said crude stockpiles fell 3 million barrels last week, opposite of forecasts of analysts polled by Reuters for a build of 2.6 million barrels.
Since the beginning of September, U.S. crude stocks have plunged 26 million barrels, but inventories remain at their highest in this century, EIA data showed. [EIA/S]
PIRA Energy Group, an influential New York-based consultancy, said it expects the glut that brought crude prices crashing from above $100 a barrel over two years ago will be gone by the second quarter of 2017. It also believes OPEC kingpin Saudi Arabia is trying to sustain prices at $50-$60.
Oil has rallied 13 percent over the past six sessions after the Organization of the Petroleum Exporting Countries announced plans to limit output, its first in eight years, when it gathers for its policy meeting in Vienna in November.
Brent crude LCOc1 settled up 99 cents, or 2 percent, at $51.86 a barrel. It rose earlier to $52.09, its highest since June 10.
U.S. West Texas Intermediate (WTI) closed up $1.14, or 2.3 percent, at $49.83. The session high was $49.97, a peak since June 29.
OPEC hopes to bring output to 32.5 million-33 million barrels per day, cutting some 700,000 bpd from a glut of about 1.0 million-1.5 million bpd estimated by analysts.
The group has asked Russia and other major producers to join in making cuts. Algeria’s Energy Minister said on Wednesday OPEC will meet other producers in Istanbul on Oct. 8-13 to discuss implementation ahead of the Vienna meeting.
Many analysts are skeptical of the target as OPEC has been producing as much oil as it can while talking of cuts.
After the week’s rally, some expect profit-taking to set in soon, with Brent’s Relative Strength Index at 69 and WTI’s at 63 - near the overbought level of 70.
“Positive news has already been baked in the cake, and prices could ease lower from here, especially given the rampant rally of recent days,” said Matt Smith of New York-based Clipperdata, which analyses data and impact from crude cargoes and supplies.
Total U.S. crude inventories, excluding the Strategic Petroleum Reserve, last week fell below 500 million barrels for the first time since January, to 499.7 million. However, over the last 16 years, the historic average has been around 328 million barrels, according to EIA data.
The drawdown has surprised many market participants as it came towards the end of summer and extended into autumn, when driving usually drops and U.S. refineries shut for maintenance.
U.S. refinery utilization rates USOIRU=ECI slid the past four weeks, dropping nearly 2 percentage points last week to 88.3 percent of nationwide capacity. It was around 93 percent two weeks ago.
“The inability of inventories to rebound given the steep drop in refining utilization over the past two weeks is especially bullish,” said John Kilduff, partner at New York energy hedge fund Again Capital.
Additional reporting by Alex Lawler in LONDON and Henning Gloystein in SINGAPORE; Editing by Marguerita Choy and Chizu Nomiyama