Oil prices extend gains after Inventory Data
By
/schema.org/Person" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; display: inline-block; position: inherit; background-position: 0px 0px;"> TIMOTHY PUKO and
/topics.wsj.com/person/A/biography/7571","text":"Biography"},{"type":"link","icon":"twitter","url":"https://twitter.com/MattCowleyBR","text":"@MattCowleyBR"},{"type":"link","icon":"email","url":"mailto:matthew.cowley@wsj.com","text":"matthew.cowley@wsj.com"}]}" itemprop="author" itemscope="" itemtype="https://schema.org/Person" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; display: inline-block; position: inherit; background-position: 0px 0px;">
MATTHEW COWLEY
Oil prices extended their gains after government data revealed a smaller-than-expected increase in crude-oil stockpiles in the U.S. in the latest week, while the international energy watchdog also struck an upbeat note on rising demand.
The U.S. Energy Information Administration said crude-oil stockpiles gained 1.3 million barrels to 483.7 million barrels in the week ended April 10. Analysts surveyed by The Wall Street Journal had predicted a 3.6 million-barrel increase. Stockpiles remain at the highest in about 80 years, according to the EIA.
Light, sweet oil for May delivery traded up $1.68, or 3.2%, at $54.97 a barrel on the New York Mercantile Exchange, its highest mark since early January.
Brent, the global benchmark, traded up $1.41, or 2.4%, at $61.22 a barrel on ICE Futures Europe.
The International Energy Agency, which advises industrialized nations on oil policies, said oil demand would rise by 1.1 million barrels a day this year. That would be a “notable acceleration” on last year’s 700,000 barrels a day growth, it said.
The IEA’s estimates confirm several signs of demand growth that oil analysts have pointed out in recent weeks, said Guy Baber, head of major oil research at Simmons & Co. International in Houston.
“You need global demand growth north of 1 million barrels a day to begin the rebalancing,” he said. “It’s a critical component…not just this year but for the next few years.”
2/moveinc.wsj.com/markets_article","adSize":[[700,82],[540,82]],"adSizeMap":{"at12units":[[540,82]],"at16units":[[700,82]]},"autoRefresh":false,"adTargeting":{"metazone":null,"msrc":null,"circ":"snippet_free_pass","bkuuid":null}}" data-cb-ad-id="RealtorAd" data-tracking="moveinc.wsj.com/markets_article" id="body-AD_RE" style="margin: 0px 0px 30px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; min-height: 25px; background-position: 0px 0px;">
Phillip Capital said investors should have a “bullish bias” because of the signs of growing demand. There is also a growing belief that the Chinese government will try to juice its soft economy, another factor that could lift demand for oil and potentially lead to higher prices, it said.
It said volatility is likely to spike this week now that now that prices have climbed so far. Rallies have repeatedly lost steam as oil approaches $60 a barrel, they said. “The storm should likely come with higher volatilities expected for the rest of the week.”
Despite the optimism, the IEA also issued several warnings, saying its outlook is becoming “murkier” because of “constantly changing” conditions. The agency said there is little clarity on how the market is adjusting to the slump in global oil prices.
“Recent developments thus may call into question past expectations that supply and demand responses would tighten the market from mid-year on,” the Paris-based agency said. “…the market rebalancing may still be in its early stage.”
It pointed to the recent preliminary deal struck between Iran and world powers led by the U.S. over Tehran’s nuclear program. If the deal can be completed, and sanctions are removed, Iran might be allowed to start exporting larger volumes of oil.
Both Simmons and Macquarie Group Ltd., in separate reports, warned that all these uncertainties keep a cloud over the market. Production from members of the Organization of the Petroleum Exporting Countries surged by 890,000 barrels in March compared with February, threatening to overwhelm the recent demand growth, Mr. Baber wrote to Simmons’ clients. Production growth from around the world could do the same for nearly two years, Macquarie said.
Macquarie trimmed its forecasts for oil prices for the next three years by an average of about 20%. Prices are likely to barely budge higher through next year, not averaging above $70 a barrel again until 2017, the bank said. Production increases coming from Middle East countries, Russia, the North Sea and Iran are set to keep the market well supplied if not oversupplied until 2017, it said.
—Summer Said contributed to this article.
Write to Matthew Cowley at matthew.cowley@wsj.com