Oil shrugged off data forecast to show U.S. stockpiles gained a second week, edging back above the $50 level where prices have hovered since rallying on OPEC’s decision to cut output last month.
West Texas Intermediate futures advanced 1 percent in New York, erasing Monday’s 0.8 percent slide. WTI’s 50-day moving average climbed past its 100-day counterpart, signaling prices may gain further, according to Confluence Investment Management LLC. Inventories probably added 2.1 million barrels last week, a Bloomberg survey showed before government data Wednesday.
Oil is up about 13 percent since the Organization of Petroleum Exporting Countries reached a deal Sept. 28 in Algiers to manage supply, and prices have closed slightly above $50 a barrel for six of the last eight sessions as investors await a meeting next month where the group is scheduled to implement the agreement. An OPEC committee will meet later this month to try to resolve differences over how much individual members should pump.
“The oil price is consolidating,” Chris Weston, chief market strategist at IG Ltd. in Melbourne, said by phone. “The market has priced in the good OPEC news. It’s unlikely that we’ll see a collapse in oil; we’d need to see something pretty disappointing as we head into the November meeting for that to happen.”
West Texas Intermediate for November delivery was at $50.43 a barrel on the New York Mercantile Exchange, up 49 cents, at 9:42 a.m. in London. The contract dropped 41 cents to $49.94 a barrel on Monday, declining a second day. Total volume traded was about 16 percent below the 100-day average.
Brent for December settlement was at $51.93 a barrel, up 41 cents, on the London-based ICE Futures Europe exchange. Prices fell 43 cents, or 0.8 percent, to $51.52 a barrel Monday. The global benchmark crude traded at a $1.15 premium to December WTI.
The OPEC plan is an important development, and may see market rebalancing “much sooner” than the end of 2017, International Energy Agency Executive Director Fatih Birol said in a Bloomberg TV interview. On the other hand, prices at $60 a barrel would give U.S. shale drillers a “strong impetus” to boost production.
U.S. gasoline supplies probably dropped by 1.13 million barrels last week, according to the Bloomberg survey before the EIA report. Nationwide crude stockpiles expanded to 474 million barrels through Oct. 7, keeping inventories at the highest seasonal level in at least three decades.
WTI’s 50-day moving average rising above its 100-day counterpart lowers the odds of oil dipping below $40 a barrel and indicates it may trade as high as $55, absent a disruption, according to Bill O’Grady, chief market strategist at Confluence Investment Management.
Oil prices will probably trade near $50 a barrel through the end of winter unless OPEC reaches an agreement to trim supply, according to Jan Stuart, global energy economist at Credit Suisse Group AG.
Shale producers would take six months to a year to react if oil reaches $60 a barrel, according to IEA’s Birol.