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London - Oil headed for its biggest weekly increase this year in London as sliding US inventories and signs of stronger demand signaled 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% this week. US crude stockpiles fell to the lowest since January, while gasoline inventories were the smallest this year, the Energy Information Administration said on 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 range-bound,” Francisco Blanch, head of commodities research at Bank of America, 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 20 cents to $51.69 a barrel on the London-based ICE Futures Europe exchange at 11:01, heading for a weekly advance of 7.5%. The contract climbed 52c on Thursday to close at $51.49. The global benchmark crude traded at a premium of $2.66 to WTI.
Front-month Brent futures traded at a premium to the second month for the first time since January, with a spread of 18c 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 a barrel on the New York Mercantile Exchange, 4c lower. Total volume traded was about 19% below the 100-day average. Prices on Thursday gained 29c 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 December 23, EIA data showed.
Oil-market news:
• Libya’s crude production will average 1.03 million barrels a day next year, up from a previous forecast of 843 000 barrels a day, said Fitch Group’s BMI Research.
• Eni SpA joined its oil-industry peers in posting a better-than-expected performance due to cost reductions, rising output and higher cash flow.
• OPEC shipments will increase to 24.14 million barrels a day in the four weeks to August 12 versus the prior period, tanker-tracker Oil Movements said in a weekly report.
• Saudi Aramco’s advisers have recommended London for the company’s listing, with US disclosure rules a concern for Saudi authorities, Reuters reported, citing unidentified sources familiar with the matter.
• Drillers from ConocoPhillips to Hess have slashed their capital spending plans in recent days, as companies lay out their plans to cope with oil prices stuck below $50 a barrel.
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