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Oil rallies a second day in New York to trade near US$50 a barrel
[LONDON] Oil surged a second day in New York to surpass US$50 a barrel for the first time in more than a week, extending its rebound from the lowest level in 5 1/2-years.
West Texas Intermediate futures gained as much as 5.8 per cent in New York before paring their rally. They rose 5.6 per cent yesterday.
Opec predicted the rate of US supply growth will be slower than it previously forecast, as companies curb drilling activity and cut spending plans. US output surged to 9.19 million barrels a day last week, the fastest pace in weekly records dating back to January 1983, the Energy Information Administration reported on Wednesday.
Crude slid almost 50 per cent last year, the most since the 2008 financial crisis, as the Organization of Petroleum Exporting Countries resisted calls to cut its output ceiling amid the US shale boom, exacerbating a surplus estimated by Kuwait at 1.8 million barrels a day. Demand for Opec crude will average 28.8 million barrels daily this year, the group said on Thursday in a report.
"Opec's monthly report has taken over the focus with prices seemingly rising on their view that US supply will slow," Ole Hansen, head of commodity strategy at Saxo Bank A/S, said by e-mail.
"However, when you see another record production from the US last week despite a 12 per cent cut in rig counts it does not give much hope for Opec that reductions will come from the US".
West Texas Intermediate for February delivery gained as much as US$2.79 to US$51.27 a barrel in electronic trading on the New York Mercantile Exchange and was at US$49.22 at 2:27 p.m. London time. The contract advanced 5.6 per cent to US$48.48 on Wednesday, the most since June 2012. The volume of all futures traded was more than three times the 100-day average for the time of day.
Brent for February settlement, which expires on Thursday, rose 30 cents, or 0.6 per cent, to US$48.99 a barrel on the London-based ICE Futures Europe exchange. More-active March futures added 56 cents to US$50.42.
Brent traded below WTI this week for the first time since July 2013, indicating that Saudi Arabia's strategy of curbing American shale output growth is working, according to Societe Generale SA. The difference reflects that oil storage capacity is more readily available in the US than elsewhere, according to Citigroup Inc.
US crude production increased by 60,000 barrels a day in the week ended Jan 9, the EIA reported on Wednesday. Stockpiles expanded by 5.39 million barrels to 387.8 million, more than 9 per cent above the five-year average for this time of year, according to the Energy Department's statistical arm. Inventories at Cushing, Oklahoma, the delivery point for New York-traded futures, climbed for a sixth week.