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Oil prices edged up Thursday, supported by the surprise decline in U.S. inventories, suggesting that the global glut in supply is slowly being worked through.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in December CLZ6, +0.83% traded at $49.38 a barrel, up $0.20 in the Globex electronic session. December Brent crude LCOZ6, +0.98% on London’s ICE Futures exchange rose $0.38 to $50.40 a barrel.
Overnight, oil prices rose after the U.S. Energy Information Administration data showed crude inventories fell 553,000 barrels in the week ended Oct. 21. The data upended the market’s expectation for an increase.
“The global market is tightening much faster than is currently priced in,” said Paul Horsnell, head of commodity research at Standard Chartered. The bank forecasts Brent averaging $55 a barrel this quarter, with prices rising to $66 on average in 2017.
Gains were capped, however, as doubts lingered over the ability of the Organization of the Petroleum Exporting Countries to reach an agreement next month to scale back the group’s production.
“Many traders in the market actually laugh at the thought that OPEC would ever reach a deal,” said Michael McCarthy, the chief markets strategist at CMC Markets based in Sydney. “And if even a deal is made, people don’t think the quotas will be observed.”
Last month, the 14-member bloc agreed that some measures should be taken to revive global oil prices. It was suggested the group should cap its total daily production between 32.5 million and 33 million barrels, equivalent to a reduction of 200,000 to 700,000 barrels a day.
“Many traders in the market actually laugh at the thought that OPEC would ever reach a deal,”
The agreement had helped to boost prices, but growing skepticism over its execution caused oil to creep back below $50 a barrel. Smaller OPEC producers have also become more vocal about being exempted from the deal.
Iraq, OPEC’s second-biggest producer after Saudi Arabia, has said it can’t cut production because it needs the revenue from oil to offset the cost of fighting Islamic State. Apart from Nigeria, Libya and Iran, who are already on the exemption list, some analysts say Venezuela also aims to be excluded from the deal given the oil-dependent economy has been hit hard by falling oil prices.
Nymex reformulated gasoline blendstock for November RBX6, +0.08% — the benchmark gasoline contract — rose 0.6% to $1.48 a gallon. ICE gasoil for November changed hands at $460.50 a metric ton, down $1.50 from the previous settlement.
