Oil Rises On Middle East, U.S. Output, But IEA Report Caps Gains
Brent oil rose to $59 a barrel on Wednesday amid Middle East tension and signs of a dip in U.S. production, but gains were capped after the International Energy Agency (IEA) said supplies might take longer to tighten than previously expected.
Front-month Brent crude futures LCOc1 were up 59 cents at $59.02 by 1340 GMT, while U.S. crude futures CLc1 had gained 60 cents to $53.95.
The spread between Brent and WTI front-month futures LCO-CL1=R was at $5.11, after touching $4.78 – its lowest since Feb. 3.
Prices drew support from uncertainty in the Middle East, where fighting continues in Yemen. A Saudi-led campaign of air strikes against Iran-allied Houthi rebels threatened to turn into a ground intervention after Egypt said it had discussed military maneuvers with Saudi Arabia and other Gulf allies.
“Any instability's always going to keep (prices) fairly buoyant,” said Rob Montefusco, a senior trader at Sucden Financial.
In the United States, North Dakota's February oil production fell by 15,000 barrels per day (bpd) versus January, although the number of producing wells hit a record high.
That followed a U.S. Energy Information Administration (EIA) report forecasting U.S. shale production would fall by 45,000 bpd to 4.98 million bpd in May, which would be the first monthly decline in four years.
But world oil markets may take longer to tighten than expected due to supply rising faster than demand, the IEA said on Wednesday. Production from the Organization of the Petroleum Exporting Countries surged to 31.02 million bpd in March, almost a two-year high, outweighing a rise in demand.
“Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on,” the IEA, which advises industrialized countries on energy policy, said in a monthly report.
Crude stocks in the United States rose by 2.6 million barrels last week, compared with analysts' expectations for an increase of 4.1 million barrels, the American Petroleum Institute (API) reported on Tuesday. Official inventory data is due at 1430 GMT on Wednesday. [API/S] [EIA/S]
Meanwhile, China's economic growth slowed to 1.3 percent between January and March on a quarterly basis after seasonal adjustments, compared with growth of 1.5 percent in the previous three months.
March factory output rose 5.6 percent from a year earlier, below the 6.9 percent seen in a Reuters poll and its lowest level since the global financial crisis in 2008.