Oil rose more than 1 percent, with benchmark Brent crude hitting $70 a barrel for the first time in a week, boosted by healthy world economic growth prospects and expectations for continued production curbs by OPEC, Russia and their allies.
U.S. West Texas Intermediate crude futures closed up 90 cents to $64.47 a barrel, for a gain of 1.4 percent. WTI reached its highest since December 2014 on Jan. 16 at $64.89.
Brent crude futures LCOc1 settled up 93 cents, or 1.4 percent, to $69.96, not far off the three-year high of $70.37 reached on Jan. 15.
Futures pared some gains in post-settlement trading after weekly inventory figures from industry group the American Petroleum Institute showed a surprise 4.8 million-barrel increase in crude oil stocks.
If the U.S. Energy Department data also shows an increase in inventories, it would break a nine-week streak of drawdowns that has helped U.S. crude supply decline to its lowest since Feb. 2015. Analysts forecast a 1.6 million-barrel draw in Reuters poll.
Still, U.S. crude futures were up 82 cents to $64.39 a barrel, not far from the day’s settlement, as crude had rallied on thin volumes headed into the release.
“I really think U.S. crude inventories are about to even out and probably show some modest builds over the next few weeks which would be seasonal as we head into turnarounds,” said Andrew Lebow, senior partner at CRG Associates. “Perhaps this will blunt the rally and let some of the excess length out of the market.”
The International Monetary Fund revised upward its forecast for world economic growth, which could help demand for petroleum products. It comes as the Organization of the Petroleum Exporting Countries, Russia and other producers continue their supply-cut agreement which began in January 2017 and is due to run until the end of 2018.
OPEC’s main objective for the cuts is to eliminate a global surplus in oil stocks and rebalance the market. There is some expectation that OPEC will let the agreement expire at the end of 2018, but major producers have not yet suggested that this is in the offing.
The sharp plunge in Venezuelan production is offsetting increases from the United States, which is on the cusp of breaking its all-time production record of 10.04 million barrels per day.
Venezuela’s output fell to a meager 2 million bpd in 2017, far short of expectations for 2.5 million bpd, and the International Energy Agency said it could keep declining in 2018.
“Six months ago there was a lot of consternation about how fast (U.S.) production might grow but that’s been offset by Venezuelan volatility,” said Tony Scott, managing director of analytics at BTU Analytics in Denver.
He added that with Saudi and Iranian production likely to remain steady throughout the year, it was hard to see an increase in supply that would undermine the rally.