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Oil Tops $51 as Market Bets on Dip in US Crude Stockpiles

April 4, 2017 at 17:17 by Andrew Moran

Oil futures topped $51 on Tuesday as traders expect a decrease in US crude stockpiles. Oil prices are trading near one-month highs based on reports of a potential drawdown in US crude and product inventories, even as Libyan production returns to normal after last week’s disruption.

May West Texas Intermediate (WTI) crude futures rose $0.82, or 1.63%, to $51.06 per barrel at 16:48 GMT on Tuesday on the New York Mercantile Exchange. US crude has not traded at these levels since the beginning of March. These gains come as US crude suffered a 10% loss in the first quarter of 2017.

Brent, the international benchmark for oil prices, is also rallying on Tuesday. June Brent crude futures climbed $1.01, or 1.90%, to $54.13 a barrel on London’s ICE Futures exchange. Brent also recorded a 9% drop in the January-to-March period.

Oil futures are rebounding due to expectations of weekly US crude inventories data that would highlight a decline. With refineries working diligently to keep up with surging gasoline demand, it is projected that US crude and oil product stocks would fall this week after increasing for two consecutive weeks. Demand has been picking up in recent weeks in key markets, particularly in the US, the world’s biggest consumer of oil.

The American Petroleum Institute (API), an industry trade group, is scheduled to publish its weekly inventory data on Tuesday. The US Energy Information Administration (EIA) will release its data on Wednesday.

Oil prices were still soaring, even though Libya’s output levels normalized. Last week, an armed group shut down pipelines over wage issues, a move that disrupted production of 250,000 barrels per day (bpd). This was offset by reports that the Organization of the Petroleum Exporting Countries (OPEC) would extend its November agreement to cut production at next month’s meeting in Vienna.

The global supply glut continues. As oil prices edge higher amid OPEC production freezes, US companies are taking advantage of these prices by increasing output efforts, a trend that is concerning analysts and industry experts worldwide. By extending the six-month output freeze by OPEC and non-OPEC nations, oil prices can remain above the important psychological threshold of $50.

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