Oil prices ticked higher Wednesday after a fresh close at the lows of the year a day earlier, with gains following a surprise inventory drawdown in U.S. data out late Tuesday.
Prices gained even as a report said Saudi Arabian oil production surged to a record near 11 million barrels a day this month.
Read: Here’s why falling oil prices are now a net drag on the U.S. economy
The American Petroleum Institute reported late Tuesday that U.S. crude supplies fell by roughly 1.5 million barrels for the week ended Nov. 16, according to sources, an unexpected drop. The API data did show that gasoline supplies climbed by 706,000 barrels while distillate stockpiles declined by 1.8 million barrels, sources said.
The Energy Information Administration, which will issue its own weekly figures Wednesday morning, has so far reported crude supply gains in each of the past eight weeks. On average, analysts surveyed by The Wall Street Journal expect the EIA to report a climb of 1.9 million barrels in crude supplies. They expect supply declines of 400,000 barrels for gasoline, and 2.3 million barrels for distillates.
Ahead of that report, January West Texas Intermediate crude CLF9, +1.85% rose $1.05, or nearly 2%, to $54.48 a barrel. It settled Tuesday at $53.43 on the New York Mercantile Exchange, the lowest front-month contract settlement since Oct. 26, 2017, according to Dow Jones Market Data.
“The market has started to rebound again to leave initial support at $52.75 [for WTI], said Richard Perry, analyst with Hantec Markets. “API inventories showed a surprise crude stocks drawdown which will put focus now on today’s EIA inventories. However, any rebound will now find significant resistance of overhead supply at $54.75 up towards $58.00.”
Global benchmark January Brent LCOF9, +1.79% rose $1.17, or 1.9%, to $63.70 a barrel. Its finish at $62.53 Tuesday was the lowest settlement since February.
Both WTI and Brent oil earlier this month lapsed into a bear market, defined as a decline of at least a 20%, after trading at nearly four-year highs in early October.
Read: A death cross is forming in U.S. oil, underlining the unraveling of crude prices
As for Saudi Arabia, the jump in output was a response to stronger-than-usual demand from clients preparing for a disruption in Iranian supplies, Bloomberg reported, citing industry executives who track Saudi output. The figures were earlier reported by trade publication International Oil Daily.
Riyadh has been pumping about 10.8 million to 10.9 million barrels a day of crude, the Bloomberg report noted. On some days, more than 11 million barrels a day were supplied to the market by drawing down domestic and overseas stockpiles, it said.
It was the decision by the Trump administration to grant waivers to major buyers of Iranian crude following the enactment of U.S. sanctions on the Islamic Republic that had fueled global oil market selling pressure. Sanctions had been expected to keep most Iranian oil off the market.
At the same time, leading producers U.S., Russia and Saudi Arabia are pumping crude at record levels, causing global supply to significantly outrun demand, a monthly update from the International Energy Agency showed last week.
OPEC and its allies signaled earlier this month that they could enact a joint production cut. Such a move would come just months after the group decided to ramp up production after more than a year of holding back output. OPEC has reached an initial agreement to cut output at the meeting next month, but it hasn’t yet agreed on the amount, according to Reuters, which cited comments from United Arab Emirates OPEC Governor Ahmed al-Kaabi to the Al Bayan newspaper.
Read: Saudis to capitulate on oil as U.S. stockpiles surge—analysts
Stock-market volatility, including a plunge that flipped major averages negative for the year, has added to concerns for global thirst for oil at the same time that energy markets are trying to sort an oversupply situation. Groups, including OPEC, have cut their oil-demand growth outlook for this year and next.
Meanwhile, the U.S. natural-gas supply report will be released Wednesday at noon Eastern Time, a day earlier than usual because of Thursday’s Thanksgiving holiday.
December natural gas NGZ18, +3.40% rose 4.1% to $4.71 per million British thermal unit after a weather-influenced rally took prices up nearly 15% last week, hitting their highest in over four years.
December gasoline RBZ8, +1.03% rose 1.1% to $1.513 a gallon, while December heating oil HOZ8, +0.97% gained 1.1% to $2.012 a gallon.
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