Oil rose to a five-month high in New York after a further drop in U.S. crude production signaled lower prices are taking a toll on the nation’s shale boom.
Futures climbed as much as 0.9 percent after rising 6.3 percent the previous two sessions to close above $45 a barrel. Production slipped for a seventh week to the lowest since October 2014, a report from the Energy Information Administration showed. Nationwide supplies rose by 2 million barrels to 540.6 million, the highest since 1929. ConocoPhillips is reducing spending further as it posted its fourth straight quarterly loss.
“We are coming up to a tipping point,” said Dan Heckman, senior fixed-income strategist in Kansas City, Missouri, at U.S. Bank Wealth Management, which oversees about $127 billion. “There will be a gradual tightening unless there’s an economic downturn. Prices should steadily move higher through the end of the year.”
Crude has rebounded after slumping to the lowest since 2003 earlier this year amid signs the worldwide surplus will ease as U.S. production declines. Oil extended gains Wednesday after Federal Reserve officials signaled they remain upbeat about the nation’s growth and are less worried about risks posed by global economic weakness and financial-market turbulence.
West Texas Intermediate for June delivery rose 25 cents, or 0.6 percent, to $45.58 a barrel at 11:48 a.m. on the New York Mercantile Exchange. The contract reached $45.72, the highest intraday level since Nov. 5. Total volume traded was 24 percent below the 100-day average.
Brent for June settlement advanced 40 cents, or 0.9 percent, to $47.58 a barrel on the London-based ICE Futures Europe exchange. The contract expires Friday. The more-active July future advanced 32 cents to $47.25. The global benchmark crude traded at a $2 premium to WTI.
“Bullish sentiment is underpinning the market,” said Carl Larry, director of oil and gas issues in Houston for consultant Frost & Sullivan LP. “There’s a lot of money moving into commodities. We are seeing a decline in U.S. crude production and a growing reliance on imports of both crude and products.”
U.S. production dropped by 15,000 barrels a day to 8.94 million a day through April 22, according to the EIA report Wednesday.
Gasoline inventories rose 1.61 million barrels last week. Consumption of the fuel, averaged over four weeks, was up 5.6 percent from a year earlier at 9.4 million barrels a day through April 22, EIA data show.
“I have every reason to think we’re soon heading lower with gasoline leading the way,” said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. “Gasoline is the seasonal leader and yesterday’s demand and inventory numbers were terrible.”
Gasoline futures for May delivery slipped 0.3 percent to $1.572 a gallon. Prices rose 1 percent to $1.5808 Wednesday, the highest settlement since August.
