Oil futures were significantly higher Wednesday, accelerating their earlier gains after the US Energy Information Administration reported a surprise draw on weekly oil inventories.
Analysts polled by S&P Platts were expecting the EIA would report that inventories increased by 2.5 million barrels in the prior week. The American Petroleum Institute late Tuesday reported a decline of 3.8 million barrels of oil and on Wednesday, the more highly regarded EIA report showed crude supplies dropped by 5.2 million barrels in the prior week.
Oil futures were higher ahead of the EIA inventory report amid bullish sentiment following the API’s inventory report and statements from Saudi Arabia’s oil minister Khalid Al-Falih. According to Khalid Al-Falih, “many” non-OPEC countries will join the deal to cap oil output, increasing the likelihood that the OPEC supply cut deal will be ratified in November, while also increasing the expectation that the deal would be effective at balancing the global oil market. Speaking at the “Oil & Money” conference in London, the minister said, “Non-OPEC is showing willingness to join this effort. And without mentioning names, many countries have said they are willing to not only freeze, but cut at healthy levels that will match whatever is going to happen by OPEC.”
Even without the deal; however, Al-Falih believes the oil market is balancing. He said the oil market is nearing the end of its “considerable downturn” and prices should improve through 2016 and into 2017. He added that as OPEC moves to enforce its oil output cap, the market’s fundamentals will improve even further.
WTI oil futures were recently up 3% at $51.75 a barrel. They were at $51.16 ahead of the EIA data.