U.S. West Texas Intermediate and international-benchmark Brent crude oil rallied to their highest level since late 2014 on Wednesday after a U.S. government report showed U.S. crude stockpiles declined last week and as traders continued to price in the possibility of supply disruptions in several key oil-producing nations.
The U.S. Energy Information Administration reported U.S. commercial crude inventories dropped by 1.1 million barrels in the week-ending April 13. Stockpiles of gasoline also dropped by 3 million barrels, while distillate fuels including diesel declined by 3.1 million barrels.
A surprised jump in gasoline demand also helped drive prices higher.
Crude oil is inching higher early Thursday on low volume as bullish investors look to add to this week’s solid gains.
At 0515 GMT, June WTI crude oil is trading at $68.85, up $0.38 or +0.55%. June Brent is at $73.93, up $0.45 or +0.61%.
Prices are currently pressing late 2014-highs, supported by a decline in U.S. crude inventories and a drive by Saudi Arabia to push prices into the $80 to $100 per barrel area by continuing to withhold supplies.
Reuters reported on Wednesday that top oil exporter Saudi Arabia would be happy to see crude rise to $80 or even $100 a barrel, which was seen as a sign that Riyadh will seek no changes to an OPEC supply-cutting deal that was introduced in 2017 to boost prices.
Also supporting prices is an expectation that the United States will re-introduce sanctions against OPEC-member Iran, which could result in further supply reductions from the Middle East.
Although U.S. crude production continues to rise, it’s going to take a huge leap in the number of producing oil rigs to stop the momentum that is currently driving prices higher. The market is currently transitioning from oversupplied to undersupplied and this should be enough to maintain the current rally.
We’re going to be watching hedge fund activity to see if they are increasing their long positions on this rally. If they are then this rally could last. If they aren’t then we may have to see another pullback into support because this would indicate that they are more willing to buy weakness instead of chasing the strength.
This article was originally posted on FX Empire
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