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Oil Futures Make Gains After Smaller-Than-Expected Inventory Rise

February 23, 2017 at 18:05 by Andrew Moran

Oil futures climbed on Thursday after new data found a smaller-than-expected rise in US crude inventories. Analysts say that a global supply glut may be coming to an end after Organization of Petroleum Exporting Countries (OPEC) officials confirmed the cartel has reached 90% compliance.

April West Texas Intermediate (WTI) crude futures rose $0.85, or 1.59%, to $54.44 per barrel at 16:40 GMT on Thursday on the New York Mercantile Exchange. US crude has been unable to maintain any kind of momentum as prices have dipped more than 2% year-to-date.

Brent, the international benchmark for oil prices, is also joining in the rally. April Brent crude futures jumped $0.75, or 1.34%, to $56.59 a barrel on London’s ICE Futures exchange. Brent has also been unable to continue last year’s meteoric rise as it is down more than 1% year-to-date.

The gains in oil prices come as new US government data suggest a smaller-than-expected increase in US crude inventories. According to the US Energy Information Administration (EIA), crude stockpiles surged by 564,000 barrels to a total of 518.7 million barrels in the week ending February 17. Analysts had initially projected an increase of 3.5 million barrels.

Meanwhile, the EIA also reported that US gasoline stocks declined by 2.6 million barrels, and distillate fuel stocks decreased by 4.9 million barrels.

OPEC Secretary General Mohammed Barkindo said on Wednesday that its members have reached near full compliance to the production cuts they agreed to in November. He also noted that Russia and non-OPEC producers will stick to their pledges of slashing output. It remains unclear if OPEC will extend the supply cuts.

Although some analysts had expected US companies to ramp up production to take advantage of higher oil prices, experts note that many oil firms are still trying to recover from the industry collapse in 2014. If US producers do increase their output levels then they could undermine efforts to keep oil prices above $50.

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