Oil rises as equities rally, physical market seen tighter

NEW YORK (Bloomberg) -- Oil surged as much as 2.6% amid a broader market rally and signs that physical oil supplies are tightening.

Futures pared a weekly loss to 0.8%. U.S. stocks moved higher as investors assessed a report that White House Chief of Staff John Kelly is deciding whether to fire Steve Bannon. Data from the Energy Information Administration showed that U.S. oil production had the biggest weekly advance since June last week, even though crude stockpiles declined by the most since September.

Futures are "finally catching up with some of the signs we’ve seen that the physical market is tightening,” Clayton Rogers, an energy derivative broker at SCS Commodities Corp. in New Jersey, said. “Brent spreads are ripping, U.S. crude stocks are drawing rapidly.”

West Texas Intermediate for September delivery climbed $1.36 to $48.45/bbl at 12:42 p.m. on the New York Mercantile Exchange.

Brent for October settlement rose $1.59 to $52.62/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $3.98 to WTI.