On Wednesday, U.S. oil prices increased more than 2% in early Asian trade, recovering from a three month low after industry statistics indicated a surprise drawdown in U.S. crude stockpiles and Goldman Sachs (NYSE:GS) put a positive turn on OPEC’s compliance with production cuts.
U.S. West Texas Intermediate crude (CLc1) was trading up 70 cents, or 1.5%, at $48.42 a barrel by 0036 GMT, having earlier increased more than $1 to $48.87. The increase came after the deal declined for a 7th session in a row on Tuesday, the longest losing streak since January 2016.
Brent futures increased 60 cents, or 1.2%, at $51.52, after settling down 43 cents at $50.92 on Tuesday, the deepest finish since November.
U.S. crude stocks dropped by 531,000 barrels the previous week, industry group the American Petroleum Institute stated on Tuesday after settlement.
That compared with analysts’ expectations for an upsurge of 3.7 million barrels. If the draw is complete by government data on Wednesday, it would be the first decline after nine consecutive increases.
The data also indicated, U.S. gasoline and distillate inventories drew more than expected.
On Tuesday, oil plunged after the Organization of the Petroleum Exporting Countries (OPEC) reported an increase in global crude stocks and a surprise production increased from its biggest member, Saudi Arabia, additionally pressuring prices that have erased almost all of their gains since OPEC broadcasted production cuts in November.
Secondary sources had said Saudi output declined in February to 9.797 million barrels per day (bpd), however, Riyadh told OPEC it increased to 10.011 million barrels per day bpd.
In an effort to eliminate market concerns, the Saudi energy ministry stated the “difference between what the market observes as production, and the actual supply levels in any given month, is due to operational factors that are influenced by storage adjustments and other month to month variables.”
Influential U.S. investment bank Goldman Sachs create a positive light on the numbers, stating compliance with output cuts stays high in spite of the increase in stocks. Market rebalancing is still developing and the bank expects demand for oil to finally surpass supply next quarter.
“Our expectations that inventories will draw through 2017 therefore leads us to expect that Brent timespreads will continue to strengthen with the forward curve in backwardation by 3Q17,” Goldman said in its research note.
The Organization of the Petroleum Exporting Countries (OPEC) monthly report said oil stocks in industrialized nations increased in January to 278 million barrels above the five-year average, with U.S. shale and other non-OPEC supply gaining.
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