Brent makes first annual gain in four years

By Rakteem Katakey, Ben Sharples on 12/30/2016

LONDON (Bloomberg) -- Brent oil, the global benchmark, is headed for its first annual advance in four years before supply cuts from OPEC and other producing nations next month intended to stabilize the market and reduce swelling global inventories.

Futures dropped 0.2% in London, trimming this year’s increase to 52%. U.S. crude inventories unexpectedly expanded for a second week with a gain of 614,000 bbl last week, the Energy Information Administration reported Thursday. The latest data on U.S. drilling from Baker Hughes is due Friday, after the number of active oil rigs increased by 82 in the eight weeks to Dec. 23.

Oil is set for its biggest annual gain since 2009 as the Organization of Petroleum Exporting Countries and 11 other nations push ahead with a plan to cut output. While they have managed to buoy sentiment and lift prices from below $30/bbl early this year, the rising number of rigs in the U.S. and the possibility of members not sticking to output targets are a risk. U.S. inventories remain at the highest seasonal level in more than three decades.

“2016 was a dramatic oil year,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “2016 started very bearishly and ended very bullishly. 2017 is likely to be the opposite, but not quite as dramatic.”

Brent for March settlement dropped 9 cents to $56.76/bbl on the London-based ICE Futures Europe exchange as of 11:24 a.m. local time. The February contract expired Thursday after losing 8 cents to $56.14. Total volume traded was about 63% below the 100-day average.

U.S. Stockpiles

West Texas Intermediate for February delivery was up 5 cents to $53.82/bbl on the New York Mercantile Exchange. The contract fell 29 cents to $53.77 on Thursday. Prices are up 45% this year.

The 614,000-bbl increase in U.S. crude inventories last week compared with a 1.5-MMbbl decline forecast by analysts surveyed by Bloomberg, while American Petroleum Institute data showed a 4.2 MMbbl expansion. Crude production dropped for a second week, while stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, grew by 172,000 bbl to 66.4 MMbbl

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