Oil prices rallied on Thursday, bouncing back from their worst loss in a month, after industry data showed U.S. stockpiles had fallen much more than expected last week.
Traders are now waiting to see if the official inventory report from the Energy Information Administration due later on Thursday will confirm the trend.
Crude oil for August delivery CLQ7, +1.73% jumped 63 cents, or 1.4%, to $45.76 a barrel, clawing back parts of the $1.94 loss from Wednesday. The contract settled 4.1% lower then, posting its first loss in nine sessions and its biggest dollar and percentage drop since June 7.
In London, Brent oil for September LCOU7, +1.65% rose 61 cents, or 1.3%, to $48.40 a barrel, partly recovering from Wednesday’s 3.7% loss.
The reversal on Thursday came after American Petroleum Institute late Wednesday reported a drop of 5.8 million barrels in U.S. crude supplies for the week ended June 30, easily beating forecasts of 2.8 million barrels.
The weekly oil report from the EIA is out at 10:30 a.m. Eastern on Thursday. Analysts polled by S&P Global Platts expect the EIA to report a decline of 1.6 million barrels in crude inventories.
“Attention is likely to be focused not only on inventory trends, but also on gasoline demand in the run-up to the fourth of July, as well as on U.S. oil production. The latter had decreased sharply in the previous week due to special factors, which makes a countermovement probable,” analysts at Commerzbank said in a note.
Rising U.S. oil production in the wake of the Organization of the Petroleum Exporting Countries accord has been a major concern in the market and has kept a lid on prices in recent months. Analysts at Morgan Stanley said in a report on Thursday that if the OPEC cuts aren’t enough to balance the market, then U.S. shale production will need to slow down.
“To support prices in the mid-$50s, [OPEC] would probably need to lower production by another 200,000-300,000 barrels a day and extend the output agreement to end-2018. We find this unlikely,” they added.
Russia on Wednesday ruled out any further production cuts other than ones already agreed. OPEC and a group of non-cartel members—including Russia—in May extended a deal to cut production into the first quarter of 2018.
“For a chance of a balanced market in 2018, the U.S. rig count can no longer grow and possibly needs to contract ~150 rigs,” the analysts added.
The weekly Baker Hughes rig count last Friday showed a decline in active oil rigs for the first in 24 weeks. The number of rigs fell by two to 756.
In other energy products on Thursday, gasoline for August RBQ7, +1.48% rallied 1.5% to $1.52 a gallon, while gasoil for the same month rose 0.6% to $444.50 per metric ton.
August natural gas NGQ17, +1.48% climbed 1.3% to $2.88 per million British thermal units.
SOURCE: Market Watch – By SARA SJOLIN MARKETS REPORTER
About Oklahoma Minerals Founder GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.