Oil prices on Wednesday extended gains after a report of US declining crude inventories and as producer club OPEC seemed to stick to its supply cuts despite pressure from US President Donald Trump.
US West Texas Intermediate (WTI) crude oil futures were at $56.02 per barrel up 52 cents, or 0.9 per cent, from their last settlement, while he International Brent crude futures were at $65.55 per barrel, up 34 cents, or 0.5 per cent from their last close.
US crude oil inventories fell by 4.2 million barrels in the week to February 22, to 444.3 million barrels, the American Petroleum Institute, API, estimated in a weekly report on Tuesday.
Oil markets have generally received support this year from supply curbs by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as OPEC+, agreed late last year to cut output by 1.2 million barrels per day (bpd) to prop up prices.
And the group has indicated it will continue to withhold supply despite pressure from US President Donald Trump this week to stop artificially tightening markets.
“Crude oil has been rising lately, not due to strong growth and rising demand but primarily due to a politically orchestrated cut in production from OPEC and friends,” said Ole Hansen, head of commodity strategy at Denmark’s Saxo Bank.
Despite this, oil remains in ample supply as US crude oil production has risen by more than 2 million bpd over the past year, to a record 12 million bpd, and because demand growth is low because of a global economic slowdown and improving energy efficiency across industries.
“The OPEC+ production cuts have so far failed to create the tightness needed to support a continued rally,” Hansen said.