LONDON: Oil headed for its biggest weekly increase this year in London as sliding US inventories and signs of stronger demand signalled the supply glut in the world’s biggest consumer may be easing.
Both Brent crude and US benchmark West Texas Intermediate have added more than 7 per cent this week.
US crude stockpiles fell to the lowest since January, while gasoline inventories were the smallest this year, the Energy Information Administration said Wednesday.
The American Petroleum Institute said on Thursday that the nation’s fuel use in June surged to the highest for that month in a decade.
US oil prices are inching closer to $50 a barrel, a level Brent breached earlier this week.
Concerns are abating that efforts by the Organisation of Petroleum Exporting Countries and its allies to curb output will be offset by rising production elsewhere.
Kuwait this week joined the United Arab Emirates in promising to pump less after Saudi Arabia called on Opec producers to improve compliance with their pledged cuts.
“The market has become very rangebound,” Francisco Blanch, head of commodities research at Bank of America Corp., said in a Bloomberg Television interview. “Below $45 in WTI we lose supply. Above $55 we gain too much supply.”
Brent for September settlement added 22 cents to $51.71 a barrel on the London-based ICE Futures Europe exchange at 1:15pm local time, heading for a weekly advance of 7.6 per cent.
The contract climbed 52 cents, or 1 per cent, on Thursday to close at $51.49. The global benchmark crude traded at a premium of $2.60 to WTI.
Front-month Brent futures traded at a premium to the second month for the first time since January, with a spread of 11 cents a barrel.
While this pattern, known as backwardation, typically signals tighter supplies, it could be affected by the upcoming expiry of the current front-month contract on July 31.
West Texas Intermediate for September delivery was at $49.10 a barrel on the New York Mercantile Exchange, 6 cents higher. Total volume traded was about 18 per cent below the 100-day average. Prices on Thursday gained 29 cents, or 0.6 per cent, to close at $49.04, the highest since May 30.
Falling Inventories
Total deliveries of petroleum products, a measure of demand, climbed to 20.3 million barrels a day, according to the API. Demand for distillate fuel and jet fuel rose, while gasoline consumption fell. US gasoline inventories fell to 230 million barrels last week, the lowest level since Dec. 23, EIA data showed.
