Oil Nears $50 as Traders Weigh U.S. Stockpile Drop, Output Gain

(Bloomberg) 

Oil traded near $50 a barrel as investors weighed declining U.S. stockpiles against rising output.

Futures added 0.3 percent in New York, extending their 0.9 percent gain on Wednesday. U.S. crude inventories dropped by 1.53 million barrels last week, while gasoline supplies fell for a seventh week, according to a report from the Energy Information Administration. U.S. oil production rose to the highest level since July 2015.

Oil climbed above $50 a barrel this week for the first time since May amid increased confidence that output curbs by the Organization of Petroleum Exporting Countries and its allies are rebalancing the market. There are also signs of a pickup in fuel demand, with U.S. gasoline consumption surging to a  record 9.84 million barrels a day last week.

“Optimism about another weekly contraction in U.S. stocks of crude and oil products has been followed by concerns about higher domestic output,” said Daniela Corsini, a commodity economist at Intesa Sanpaolo SpA in Milan.

West Texas Intermediate for September delivery was at $49.75 a barrel on the New York Mercantile Exchange, up 16 cents, at 8:05 a.m. local time. Total volume traded was about 16 percent above the 100-day average. The contract advanced 43 cents to $49.59 on Wednesday.

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Brent for October settlement rose 19 cents to $52.55 a barrel on the London-based ICE Futures Europe exchange, after adding 58 cents on Wednesday. The global benchmark crude traded at a premium of $2.66 to October-delivery WTI.

U.S. crude output increased by 20,000 barrels a day to 9.43 million a day, according to Wednesday’s report from the EIA. The 1.53 million-barrel decline in crude inventories was about half the amount analysts had predicted in a Bloomberg survey. Gasoline stockpiles fell by 2.52 million barrels to 227.7 million, the lowest level since December.

Oil-market news:

U.S. shale producers seem to be hedging again as demand for the contracts that guarantee price levels soared after 2018 WTI crude returned to $50 a barrel.“More hedging activity from North American producers increases the risk of high non-OPEC supplies next year,” Corsini said. Chesapeake Energy Corp. beat profit forecasts even as production declined. Abu Dhabi National Oil Co. asked banks for proposals to manage the sale of a project bond and is also seeking a loan as it considers raising as much as $7 billion, according to people with knowledge of the matter.