Oil marches higher on signs of massive drop in US stockpiles

Oil extended gains from the highest close in more than three years as US industry data signalled crude stockpiles dropped an eighth week.

Futures climbed as much as 0.9% in New York after rising 2.5% the previous two sessions. Inventories fell by 11.2 million barrels last week, the American Petroleum Institute was said to report on Tuesday.

If the draw is replicated in Energy Information Administration (IEA) data on Wednesday, it will be the biggest decline for this time of the year since 1999.

Oil is continuing its advance after a second annual gain as the Organisation of Petroleum Exporting Countries (Opec) and its allies trim supply to drain a global glut. The OPEC-led group is facing the challenge of rising US crude output, which is forecast by the EIA to expand above 10 million barrels a day as soon as next month and top 11 million in November 2019.

"There are signs of another good drop in stockpiles and the market seems to believe that we’re going to see inventory tightening at a fairly decent rate," said Ric Spooner, a Sydney-based analyst at CMC Markets. "The positive trend remains in place."

West Texas Intermediate for February delivery rose as much as 57 cents to $63.53 a barrel on the New York Mercantile Exchange, and was at $63.43 at 2:54pm in Hong Kong. Total volume traded was about 22% above the 100-day average.

Prices advanced $1.23 to $62.96 on Tuesday, the highest close since December 2014.

Brent for March settlement climbed as much as 44 cents, to $69.26 a barrel on the London-based ICE Futures Europe exchange after advancing 1.5% on Tuesday to the highest since December 2014. The global benchmark crude was at a premium of $5.81 to March WTI.

US crude inventories probably dropped by 3.75 million barrels last week, according to a Bloomberg survey before the EIA report. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, probably slid by 1.5 million barrels, an estimate compiled by Bloomberg shows.

Oil-market news:

Opec members are not keen on Brent prices above $60 a barrel because of the potential for more shale output, Iran’s Oil Minister Bijan Namdar Zanganeh said, according to the ministry’s news service Shana.

The Trump administration is ruling out plans to sell new drilling rights off the coast of Florida, including eastern Gulf of Mexico waters coveted by oil companies, amid pressure from Republican Governor Rick Scott.