SINGAPORE: Oil extended gains near US$70 a barrel as shrinking crude inventories and slowing production growth in the U.S. raised fears of an impending supply crunch.
Futures in New York climbed as much as 1.3 percent after posting the biggest gain in more than two months on Tuesday. U.S. inventories slid 8.64 million barrels last week, the American Petroleum Institute was said to report, while the U.S. government cut its outlook for oil production due to pipeline bottlenecks.
Meanwhile, Hurricane Florence threatens to disrupt fuel supplies as it moves toward North Carolina.
Oil has climbed more than 7 percent from the lows of mid-August as impending U.S. sanctions on Iran have started forcing buyers to shun imports from the Islamic republic before a November deadline.
With frequent attacks on Libya’s production and falling output in Venezuela, traders are weighing whether the Organization of Petroleum Exporting Countries and its allies, as well as the U.S., will be able to fill in the void.
“Numerous concerns exist on the supply side with stalling U.S. output, Iranian sanctions and the hurricane impact being among those,” said Hong Sungki, a commodities trader at NH Investment & Securities Co. in Seoul.
“Price volatility is expected to stay at least until November when the Iranian sanctions take effect.”
West Texas Intermediate for October delivery rose as much as 89 cents to $70.14 a barrel on the New York Mercantile Exchange and traded at $69.91 a barrel at 2:24 p.m. in Singapore. The contract climbed 2.5 percent, or $1.71, to $69.25 on Tuesday. Total volume traded was about 36 percent above the 100-day average.
Brent for November settlement advanced 33 cents to $79.39 on the ICE Futures Europe exchange after a 2.2 percent advance on Tuesday. The global benchmark traded at a $9.75 premium to WTI for the same month.
Some other key oil-market figures, news and events:
• If government data on Wednesday confirms the API’s report of a more-than 8-million-barrel draw in American crude stockpiles, that would be the biggest decline since July. A Bloomberg survey of analysts forecasts a 2-million-barrel slide.
• The Energy Information Administration sees U.S. crude output averaging 10.66 million barrels a day this year, lower than the previous estimate of 10.68 million a day. Next year, production is forecast to average 11.5 million barrels a day, down from a previous estimate of 11.7 million a day.
• Oil producers are signaling their concern that Permian Basin pipelines won’t be ready on time next year, with a five-fold jump in hedging designed to protect against bottlenecks in America’s biggest shale field.
• Florence is expanding on its relentless advance toward North Carolina, with heavy rain potentially imperiling major fuel pipelines including the Colonial Pipeline, the largest mover of oil products from the Gulf Coast to the eastern U.S.
• The Cboe/Nymex Oil Volatility Index rose 4.2 percent on Tuesday, increasing to the highest level in almost two months.Iran is starting to store oil on its fleet of supertankers again as impending U.S. sanctions force the Persian Gulf country to revive a strategy it deployed under previous curbs.
• Russia has enough spare capacity to set a new record in oil production if the market is in need of more supplies, according to the nation’s energy minister. - Bloomberg