190313 oil pumping jacks
Oil pumping jacks near Almetyevsk, Tatarstan, Russia. Oil has rallied more than 25 per cent this year. Image Credit: Bloomberg

Tokyo: Crude rose for a third day after an industry report showed an unexpected drop in US stockpiles just as planned cuts and disruptions to Organisation of Petroleum Exporting Countries (Opec) output are tightening supply.

Futures in New York added as much as 1.1 per cent. US crude inventories declined by 2.58 million barrels last week, the American Petroleum Institute was said to report. That contrasts with a survey showing an increase in stockpiles in government data due Wednesday.

While Opec nations like Saudi Arabia press on with planned production curbs, crises in fellow members Venezuela and Iran are also removing barrels from the market.

12.3m bpd

EIA’s forecast for US output this year, 110,000 barrels lower than forecast previously

Oil has rallied more than 25 per cent this year as Opec and its partners show their commitment to restrain production even in the face of criticism by US President Donald Trump. Adding to the market’s upbeat tone, the US government lowered its output forecast for the first time in six months on the back of slowing American drilling activity.

“On the bullish side we have a rapidly deteriorating situation in Venezuela,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.

“Further on the bull side, Opec+ continues to deliver on pledged cuts.”

West Texas Intermediate for April delivery climbed as much as 63 cents to $57.50 a barrel on the New York Mercantile Exchange and traded at $57.47 at 10.49am in London.

Brent for May settlement rose 52 cents to $67.19 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.38 premium to WTI for the same month.

Inventory report

If a decline in US crude inventories is confirmed by the Energy Information Administration’s report, it would be a second drop in three weeks. The median forecast of analysts surveyed by Bloomberg is for a 3 million-barrel increase in nationwide stockpiles.

The EIA in its monthly Short-Term Energy Outlook trimmed American crude output this year to 12.3 million barrels a day — 110,000 barrels lower than it had forecast previously. In 2020, production is expected to reach 13.03 million barrels a day — 170,000 a day lower than last month’s estimate. The nation’s rig count tumbled to a 10-month low last week, suggesting the rate of production growth could slow.