WTI rises third day as U.S. crude supply seen extending decline

NEW YORK (Bloomberg) -- Oil climbed before government data forecast to show U.S. crude inventories dropped for a fifth week, trimming a glut.

Futures gained as much as 1.1% in New York, extending a 2.4% advance in the previous two sessions, buoyed by gains in European equities to their 2016 highs. Stockpiles probably fell by 2.5 MMbbl last week, according to a Bloomberg survey before an Energy Information Administration report on Wednesday. Output cuts agreed by OPEC members and other producers may trim swollen supplies as early as the first quarter, Citigroup Inc. said.

Oil has traded near $50/bbl since the Organization of Petroleum Exporting Countries agreed Nov. 30 to cut output for the first time in eight years. Non-OPEC producers including Russia will also trim supply. U.S. crude inventories, at the highest seasonal level since the EIA began compiling weekly data in 1982, are heading for the longest run of declines in more than two months. Gulf Coast refiners curb deliveries at the end of the year to reduce local taxes.

“The bulls have the upper hand in this low volume, pre-holiday environment,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. “There’s positive sentiment about the economy next year and that’s being felt in all the markets.”

West Texas Intermediate for January delivery, which expires Tuesday, rose 43 cents, or 0.8%, to $52.55/bbl at 9:31 a.m. on the New York Mercantile Exchange. Total volume traded was about 38% below the 100-day average. The more-active February contract climbed 54 cents to $53.60/bbl.

U.S. stockpiles

Brent for February settlement rose 81 cents, or 1.5%, to $55.73/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $2.13 premium to February WTI.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably increased by 1.9 MMbbl last week, according to a forecast compiled by Bloomberg.

“The Cushing numbers could put downward pressure on the front WTI contract,” Kilduff said.