Oil prices rose around two per cent yesterday, hitting their highest level since June, after the fifth weekly fall in US crude inventories.
Crude stockpiles in the US fell three million barrels last week, according to data released by the Energy Information Administration (EIA), overturning a Reuters forecast of analysts that expected an increase of 2.6m barrels. Inventories were still historically high for this time of year.
Brent crude, the global benchmark, was up 2.1 per cent to $51.92 per barrel in afternoon trading (GMT), peaking at $52.09. This is its highest level since 10 June.
US West Texas Intermediate crude was up 2.3 per cent at $49.80, though it hit an earlier high of $49.95, a level it hasn’t reached since 29 June.
“Crude oil’s fundamental outlook continues to improve: as well as the planned Opec oil output cut, we have seen surprise inventory destocking in the US five straight weeks now,” said Fawad Razaqzada, market analyst at Forex.com.
“In addition to the prospects of reduced supply, the oulook for oil demand appears to be healthy too, judging by this week’s key US economic data which have been mostly positive, with the key Institute of Supply Management services sector PMI surging to its highest point in almost a year.”
Prices have also been buoyed since the Organization of the Petroleum Exporting Countries (Opec) provisionally agreed to cut output to between 32.5m and 33m barrels per day.
The agreement, which will be the first production cut for eight years, surprised many market commentators as several previous attempts to thrash out a new freeze agreement have collapsed due to tension between regional rivals Saudi Arabia and Iran.
How much each member country will need to cut production by will be decided at the next formal Opec meeting in November.