Oil Extends Longest Rising Streak in Two Years as Stocks Drain

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(Bloomberg) — Oil rose again to extend the longest run of gains in two years, with reports of falling U.S. crude stockpiles giving the latest signal of tightening global supplies.

Some of the biggest moves in the past day have come at the front of the futures curve. Brent’s nearest timespread has surged — a key sign of market tightness — while swaps tied to the physical North Sea market have also increased amid frenzied trading of derivatives late Tuesday.

Crude’s rise on Wednesday was supported by the American Petroleum Institute reporting inventories fell by 3.5 million barrels last week, according to people familiar with the numbers. If confirmed by official data, it would be an eighth decline in nine weeks.

© Bloomberg Brent’s nearest timespread has soared in the last 24 hours

The oil price curve is offering the biggest yield in about a year, and investors are piling in. Supply cuts by Saudi Arabia are draining stockpiles in regions including China and helping boost confidence that the market has shaken off the worst effects of the coronavirus pandemic. While there are still concerns about near-term demand with many countries still in lockdown, vaccines have helped improve the outlook.

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“Oil prices continue to grind higher on the combination of tight supply, a weak dollar and overall positive risk sentiment,” said Jens Pedersen, a senior analyst at Danske Bank.

Prices

West Texas Intermediate for March delivery added 0.3% to $58.54 a barrel as of 9:01 a.m. in New YorkPrices are up for an eighth day, the longest run since February 2019Brent for April settlement rose 0.6% to $61.43

Still, some like Vitol SA’s Asia head Mike Muller think the rally may have gone too far. A technical indicator is signaling oil is overbought and due for a correction. There are also concerns that elevated prices will prompt producers to pump more crude.

U.S. explorers are set to boost drilling and production from the second half of this year, with crude prices likely staying above $50 a barrel, the Energy Information Administration said in its Short-Term Energy Outlook on Tuesday. The agency also said the country’s petroleum consumption is unlikely to reach pre-pandemic levels until 2023.

Other oil-market news

Winter’s iciest blast is advancing across the U.S., dialing up demand for heating fuels and threatening to set cold-weather records from the Great Plains to the Gulf of Mexico.Iraq’s output will drop to 3.6 million barrels a day this month if the semi-autonomous Kurdish region complies with the OPEC+ deal on supply cuts, Iraqi Oil Minister Ihsan Abdul Jabbar said. The country pumped 3.97 million a day in January.Norwegian energy giant Equinor ASA posted a surprise loss, and even a dividend hike couldn’t overcome investors’ disappointment as shares fell.Ineos Group said there’s limited throughput on the Graben Area Export Line, which is part of the Forties Pipeline system in the North Sea.

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