Oil jumped as Saudi Arabia prepares to slash shipments to US refiners within weeks in an effort to prevent a price-killing build-up of American stockpiles.
Brent crude climbed 52 cents to $60.67, after having lost 1.4% earlier. West Texas Intermediate gained 79 cents to $51.94 a barrel.
The Saudi state-controlled oil company has warned US refiners to brace for a steep drop in cargoes next month. Prices also were supported by a report that commodities data provider Genscape was said to note a large drop in stockpiles at the biggest US storage hub in Oklahoma, as well as an International Energy Agency warning that global supplies may be in more danger than previously thought.
“We should see a continued drawdown in crude supplies in the coming weeks and better demand,” said Phil Flynn, senior market analyst at Price Futures Group. “That would suggest we could be close to a floor in the market.”
American refiners have been told to expect much lower shipments from Saudi Arabia in January compared with recent months following last week’s Opec agreement to reduce production
In a separate development, the IEA said that combined output losses from Iran and Venezuela could reach 900,000 barrels a day during the second quarter of next year, more than doubling the 800,000 barrels Opec plans to remove from world markets.
Crude remains in a bear market after reaching a four-year high in early October as investors worry about a glut. Record American output, expected to boom to more than 12 million barrels a day in 2019, is threatening to overwhelm demand. The US has also given some nations temporary exemptions from the sanctions on Iran to prevent a market shock.
US crude inventories fell by 1.21 million barrels last week, Energy Information Administration data showed on Wednesday, a fraction of the 10.2-million withdrawal cited in an industry report a day earlier. That sparked a late-day selloff for crude that persisted until the Genscape and IEA reports.
“The excess volatility is being driven by the massive uncertainty about what’s going to happen next,” said Scott Bauer, CEO of Prosper Trading Academy. “It’s a great market for day-traders, not so great if you’re trying to put on a long bet.”
President Trump’s antitrust chief said the administration is still studying an anti-Opec bill and that Opec “implicates broader issues” of concern in addition to pure competition.