Oil climbed above $50 a barrel in New York for the first time since June as declines in U.S. crude inventories and OPEC's pledge to reduce supply lifted hopes the global glut may clear.
U.S. crude stockpiles shrank below 500 million barrels last week for the first time since January, government data show. OPEC pledged in Algiers on Sept. 28 to reduce the group's output to 32.5 million to 33 million barrels a day in a bid to shrink the world's bloated oil supplies and boost prices.
The market is set to remain oversupplied in 2017 and prices will stall at $55 a barrel as shale drillers get back to work, Goldman Sachs Group Inc.’s Head of Commodities Research Jeff Currie said.
“The main issue is the big decline in North American storage,” said Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. in Calgary. “The OPEC agreement is just spin to help support the market.”
Oil has advanced 13 percent since the Organization of Petroleum Exporting Countries agreed to the first production cut in eight years. Some analysts have expressed doubt that individual output quotas — to be determined at a meeting of the group in Vienna on Nov. 30 — will be sufficient to erode the market surplus as several countries boost production to restore disrupted supplies.
West Texas Intermediate for November delivery rose 61 cents to $50.44 a barrel on the New York Mercantile Exchange. It's the highest close since June 9.
U.S. crude stockpiles dropped by 2.98 million barrels for a fifth weekly decline, the Energy Information Administration reported Wednesday. Crude production declined for a second week to 8.5 million barrels a day.
OPEC members will meet next week for talks on implementing an output-cut deal, with Russia joining to discuss how producers from outside the group can participate in the plan.
“The drop in crude inventories over the last several weeks is seen by some as a sign that the market's rebalancing,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “It has a lot to do with an increase in crude-oil exports. The local glut is easing but that's not helping the global glut.”
Hurricane Matthew is heading for Southeast U.S. and may disrupt East Coast fuel shipments. Matthew's top winds have grown to 140 miles (220 kilometers) per hour, up from 125 mph just hours ago as it churns in the Atlantic 125 miles east-southeast of West Palm Beach, according to the National Hurricane Center.