Oil closed above $50 a barrel on Tuesday for the first time in more than 10 months as U.S. crude stockpiles are estimated to have fallen for a third week, trimming a glut.
U.S. benchmark crude rose 67 cents, or 1.4 percent, to close at $50.36 a barrel on the New York Mercantile Exchange, its highest settlement since July 21. Inventories declined by 3 million barrels last week in the U.S., according to a Bloomberg survey before a report from the Energy Information Administration on Wednesday.
Crude has surged about 90 percent from a 12-year low in February amid unexpected disruptions and a continuous slide in U.S. output. Saudi Arabia will maintain the same level of production capacity until 2020 under a new economic reform plan approved by the government to reduce its reliance on oil.
“The path of least resistance for crude is still higher and outages in Nigeria and expectations of strong EIA data tomorrow are helping the trend,” said Clayton Rogers, an energy derivative broker at SCS Commodities in New Jersey. “I think the real story is just how range-bound this market is.”
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Energy companies accounted for nine of the ten biggest gainers on the Standard & Poor’s 500 Index. The S&P 500 Oil & Gas Exploration and Production Index was up as much as 3 percent to the highest level since November during the day’s trading.
“My concern is that you’ve already built a lot of good news into the price,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “We may soon have discounted all the positive news.”
Shell Chief Financial Officer Simon Henry said the company had to withdraw repair crews last week after a second attack against the 48-inch Forcados export pipeline in Nigeria. The pipe links storage tanks onshore with an offshore port. Shell’s resignation over the disabled pipeline suggests a new level of insecurity as a wave of violence hits the oil-rich Niger Delta, leaving the country’s production at its lowest level in nearly three decades.
Gasoline futures fell amid speculation that demand for the fuel won’t meet expectations. U.S. refiners typically increase utilization this time of year after finishing maintenance as the peak-demand driving season commences.