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Oil advances as US output falls amid slowing stockpile growth

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Oil gained for a second day after climbing the most in more than three weeks as US output fell and stockpile growth slowed.

[HONG KONG] Oil gained for a second day after climbing the most in more than three weeks as US output fell and stockpile growth slowed.

Futures advanced as much as 2.4 per cent in New York after rising 5.8 per cent Wednesday, the most since Feb 22. Production slid to the lowest level since Nov 2014 and crude inventories expanded by 1.3 million barrels, the smallest reported gain in five weeks, according to government data. Producers from Opec and outside the group are finalizing a plan to discuss freezing output at a meeting in Doha on April 17, according to Qatar's energy minister.

"US output is inching in the right direction," Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone.

"Oil has climbed from its lows, but we are starting to get into territory where the price is going to need fundamentals to catch up to push it further. The freeze probably has limited impact if it doesn't include Iran and Iran has indicated it's unlikely to be part of a deal."

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Oil has rebounded this year after slumping to the lowest in more than 12 years on speculation a global surplus will ease amid stronger demand and falling US output. Prices also surged Wednesday after the the Bloomberg Dollar Index, which tracks the currency against major peers, fell 1.1 per cent following a decision by the Federal Reserve to keep borrowing costs steady while scaling back forecasts of how high rates will go this year.

West Texas Intermediate for April delivery climbed as much as 92 US cents to US$39.38 a barrel on the New York Mercantile Exchange and was at US$39.22 at 10:23 am Hong Kong time. The contract advanced US$2.12 to US$38.46 on Wednesday. Total volume traded was about 90 per cent above the 100-day average.

US Stockpiles

Brent for May settlement rose as much as 66 US cents, or 1.6 per cent, to US$40.99 a barrel on the London-based ICE Futures Europe exchange. The contract gained US$1.59 to US$40.33 on Wednesday. The global benchmark crude was at a 13-cent premium to WTI for May.

US production dropped by 10,000 barrels a day to 9.07 million barrels a day, according to an Energy Information Administration report Wednesday. Stockpiles at Cushing, Oklahoma, the delivery point for WTI, increased by 545,000 barrels to a record while nationwide supplies remain at the highest level in more than eight decades.

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