U.S. oil prices traded at their highest level in seven months on Wednesday after an industry group reported a larger-than-expected decline in U.S. crude inventories last week.
The American Petroleum Institute said late Tuesday that its data for last week showed a 5.1-million-barrel decrease in crude supplies. The U.S. Energy Information Administration will release its official data later on Wednesday and analysts polled by The Wall Street Journal expect U.S. crude stockpiles to have decreased by 2.5 million barrels.
“The unexpected API crude draw supports oil prices,” said Tamas Varga, oil analyst at PVM brokerage. “Short-term bullish developments dominate traders’ minds.”
Brent crude LCON6, +1.30% , the global oil benchmark, rose 1.2% to $49.19 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate CLN6, +1.13% futures were trading up 1.2% at $49.18 a barrel.
The Energy Information Administration will also release its weekly estimate of production. U.S. output has fallen from a peak of 9.7 million barrels a day last year to below 9 million barrels in recent weeks.
Recent supply disruptions in Canada, Nigeria, and Libya are also helping to support the upward price momentum. However, some analysts say that the outages are likely to be temporary and many of those barrels will come back online soon.
“Recent supply outages are being gradually brought under control and this might make any oil price strength short-lived,” Varga said.
U.S. oil prices have surged more than 85% from their mid-February lows on expectations that the global crude glut that sent prices plunging in mid-2014 is set to shrink. Production has started to fall in some regions including the U.S. because of spending cuts, and unexpected outages in other countries are keeping additional barrels off the market.
Still, many see the glut continuing amid increased production from members of the Organization of the Petroleum Exporting Countries including Iran. The country is ramping up its crude output after international sanctions against Tehran were lifted in January.
“The oversupply in the oil markets is very solid. The imbalance has started to shift but still nowhere near a real tightening to the point of a shortage,” said Aaron Lynch, a market analyst at optionsXpress.
Nymex reformulated gasoline blendstock RBM6, -0.85% — the benchmark gasoline contract — fell 0.9% to $1.64 a gallon. ICE gas oil changed hands at $450.25 a metric ton, up $3 from the previous settlement.