Oil spikes above $49 as inventories grow less than expected

Thomson Reuters

Oil prices edged higher on Wednesday, adding to overnight gains after data showed that U.S. crude supplies rose less than expected last week, easing concerns over a global glut.

The U.S. West Texas Intermediate crude May contract rose 67 cents, or around 1.4%, to $49.02 a barrel by 10:35AM ET (14:35GMT), after hitting a session peak of $49.12, the most since March 21.

Prices were at around $48.55 prior to the release of the inventory data.

Elsewhere, Brent oil for June delivery on the ICE Futures Exchange in London added 67 cents to $52.09 a barrel, also a level not seen since March 21.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories increased by 867,000 barrels in the week ended March 24.

Market analysts' expected a crude-stock gain of 1.4 million barrels, while the American Petroleum Institute late Tuesday reported a supply-increase of 1.9 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by 220,000 barrels last week, the EIA said.

Total U.S. crude oil inventories stood at an all-time high of 534.0 million barrels as of last week, which the EIA considered to be at the upper limit of the average range for this time of year.

The report also showed that gasoline inventories declined by 3.7 million barrels, compared to expectations for a drop 1.9 million barrels.

For distillate inventories including diesel, the EIA reported a drop of 2.5 million barrels.

Oil has fallen sharply this month amid concern that the ongoing rebound in U.S. shale production could derail efforts by other major producers to rebalance global oil supply and demand.

OPEC agreed in November last year to curb its output by about 1.2 million barrels per day between January and June. Russia and 10 other non-OPEC producers have agreed to jointly cut by an additional 600,000 barrels per day.

In total, they agreed to reduce output by 1.8 million barrels per day to 32.5 million for the first six months of the year, but so far the move has had little impact on inventory levels.

Iranian Oil Minister Bijan Zanganeh told reporters on Tuesday that a global oil cuts deal is likely to be extended, but that time is needed to discuss the subject thoroughly first.

A joint committee of ministers from OPEC and non-OPEC oil producers will meet in late April to present its recommendation on the fate of the pact. A final decision on whether or not to extend the deal beyond June will be taken by the oil cartel on May 25.

Meanwhile, armed factions at the western Libyan oil fields of Sharara and Wafa blocked production, reducing output by 252,000 barrels per day, or about a third of production, a source at the National Oil Corporation said on Tuesday.

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