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Oil up near 2-year highs, analysts see more US crude exports

[NEW YORK] Oil prices settled higher again on Tuesday, notching a monthly gain of more than 5 per cent, but analysts said bullish sentiment that has driven Brent crude to its highest in more than two years could encourage US producers to export more oil.

Brent settled up 47 cents or 0.7 per cent to US$61.37, close to its July 2015 highs reached earlier this week, and up around 37 per cent from its 2017 lows hit in June.

US West Texas Intermediate crude (WTI) settled up 23 cents or 0.4 per cent to US$54.38, still near its highest since February and close to its highest in more than two years.

Traders and brokers said investors were adjusting positions after price rises of around 5 per cent in October.

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For the month, Brent was up 6.7 per cent, while WTI rose 5.2 per cent. WTI's discount to Brent CL-LCO1=R has widened to nearly US$7, making it attractive to exporters.

"The large differential has opened the door on regional arbitrage, driving a spike in US crude exports over recent weeks," BMI Research said in a note.

US crude exports have jumped to close to 2 million barrels per day (bpd) and production C-OUT-T-EIA has risen almost 13 per cent since mid-2016 to 9.5 million bpd.

"The problem is as soon as prices move up it's too easy for US producers to add another rig or another completion crew,"said Stewart Glickman, energy equity analyst at CFRA Research in New York, "Then they increase production and you're back where you started."

US crude and petrol futures extended gains in post-settlement trade after industry group the American Petroleum Institute said that US oil inventories fell far more than expected.

Crude inventories fell 5.1 million barrels in the week to Oct 27 to 456.8 million, compared with analysts' expectations for a decrease of 1.8 million barrels. Petrol stocks plunged 7.7 million barrels, versus forecasts of a 1.5 million-barrel draw, the API said.

US government oil inventory data will be released at 10.30am (1430 GMT) on Wednesday.

Bullish sentiment has been fueled by a pledge by the Organization of the Petroleum Exporting Countries, Russia and other exporters to hold back about 1.8 million bpd in oil production to tighten markets.

Opec's adherence to its pledged supply curbs rose to 92 per cent from September's 86 per cent, a Reuters survey showed, as top exporter Saudi Arabia continued to pump below its Opec target and output in Venezuela, in economic depression, declined further.

Opec is scheduled to next meet at its headquarters in Vienna on Nov 30.