Oil prices rose further Wednesday as official data showed a much bigger than expected drop in US crude inventories, while OPEC said demand would pick up.
US benchmark West Texas Intermediate (WTI) for delivery in July won 62 cents to 60.76 a barrel compared with Tuesday’s close.
Brent North Sea crude for July gained 41 cents to stand at 65.29 in late London deals.
Oil prices had surged more than two dollars Tuesday on expectations that the US inventory data would reveal a drop, leading traders to bank profits when the fall greatly exceeded forecasts.
The Department of Energy said commercial stockpiles of US crude slumped by 6.8 million barrels last week to 470.6 million. Analysts’ consensus forecast had been for a drop of 1.45 million, according to Bloomberg.
A drop in US stockpiles is seen as an indicator of healthy demand in the world’s top crude consumer, supporting global prices.
Dealers expect that a drawdown of the United States’ burgeoning reserves during the summer months, coupled with a slowdown in its shale output, could whittle down excess global supplies.
British energy giant BP on Wednesday confirmed that the US was the biggest producer of crude last year, overtaking Russia and Saudi Arabia.
In its Statistical Review looking back at 2014, BP said last year “highlights the continuing importance of the US shale revolution, with the US overtaking Saudi Arabia as the world’s biggest oil producer and surpassing Russia as the world’s largest producer of oil and gas”, confirming findings by the International Energy Agency and analysts.
A surplus of US stocks, caused by oil extracted cheaply from shale rock, was a key reason oil prices collapsed by more than 50 percent between June and January.
“We believe that only (if) US production starts to ease off, then we would be seeing improvements to the supply situation,” said Daniel Ang, investment analyst at brokers Phillip Futures.
– OPEC forecast –
Elsewhere Wednesday, OPEC stuck to its forecast that oil demand will pick up this year but warned that over-supply may still keep a “ceiling” on crude prices, even as it kept on increasing its own output to a two-year high.
The Organization of the Petroleum Exporting Countries stuck to its prediction of total oil demand in 2015 of 92.5 million barrels per day, up 1.18 mbpd from 2014.
Consumption is expected to pick up pace in the second half in line with a global economic rebound, the 12-country cartel said in its June monthly report.
OPEC, which has traditionally sought to defend price levels by cutting output if needed, dramatically switched strategy last November when it opted to leave its production target unchanged.
At its bi-annual production meeting last week in Vienna, OPEC stuck to this strategy, keeping its output target unchanged at 30 million barrels per day.
This is seen as an attempt to maintain market share and put pressure on US shale oil producers, which need a higher oil price to be profitable than in traditional extraction methods — a strategy that experts say has had some success.
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