Investing.com - A surprise weekly drawdown in U.S. crude stocks and OPEC jawboning about deeper production cuts have suddenly energized dreary trading in oil, pushing prices to three-week highs.
The question is how long can the upward momentum last?
West Texas Intermediate, the benchmark for New York-traded crude futures, was up 50 cents, or 0.9%, at $56.47 a barrel by 1:18 PM ET (17:18 GMT). It earlier scaled $56.49.
London’s Brent, the global gauge for oil, rose 70 cents, or 1.1%, to $61.87. Its session high was $61.88.
On Wednesday, both WTI and Brent settled up more than 2% each after the U.S Energy Information Administration said domestic crude stockpiles fell by 1.7 million barrels versus analysts’ expectations for a 2.2-million-barrel build.
Also supporting crude prices was a Reuters report from Wednesday hinting at the likelihood of the forthcoming OPEC meeting in December considering deeper cuts than the 1.2 million barrels per day agreed by the cartel and its key ally Russia almost a year back.
But oil has been here before, being no stranger to the occasional unexpected stock draw and OPEC ministrations in pushing the market up.
That has led to some traders openly questioning the market’s viability in holding the current bid, especially in the face of continued uncertainties over U.S.-China trade talks and European growth amid fresh Brexit troubles.
“While prices could even go higher from here, we feel several global macro events will determine the next move in crude oil,” said Tariq Zahir, managing member at the oil-focused Tyche Capital Advisors fund in New York.
“Energy prices could really take a hit if the first phase of the U.S.-China deal doesn’t get implemented when presidents Trump and Xi meet in Chile in November, as the road from there will be new tariffs due in December.”
Oil bulls, meanwhile, pointed to the whopping declines in inventories of fuel such as diesel and gasoline over the past month that they should continue supporting prices. Those drawdown came as refiners made less of such products in recent weeks amid plant closures to meet new maritime fuel processing standards.
“It is getting to a point where low inventories of product and strong demand are getting serious,” said Phil Flynn, Price Futures Group’s senior energy markets analyst, who typically has a bullish outlook on oil.