Oil Up as Kuwait Backs Freeze Plan
Oil prices rose on Tuesday after Kuwait insisted major producers will agree to freeze output later this month even as key player Iran continued to balk at the plan.
The market extended gains in post-settlement trade after preliminary data on U.S. crude supply-demand for last week from industry group American Petroleum Institute (API) showed a surprise draw of 4.3 million barrels.
Analysts polled by Reuters had expected U.S. crude stockpiles to have risen by 3.2 million barrels to an eighth straight week of record highs. The U.S. government’s Energy Information Administration (EIA) will release official inventory data on Wednesday.
“This is totally unexpected,” John Kilduff, partner at New York energy hedge fund Again Capital, said on the API data.
“It could open a new run higher in crude prices, though I’d say for the rally to last, we have to see higher refinery runs in tomorrow’s EIA report, or other indications of demand, like big gasoline draws. Just lower imports won’t do.”
Crude prices remain nearly 40 percent above 12-year lows struck in mid-February, although their recovery has fizzled lately on skepticism over the output freeze idea floated by producers.
U.S. crude CLc1 finished the session up 19 cents at $35.89, hitting a one-month low of $35.24 during the session. It rose to $36.58, gaining 88 cents, after the API data.
Brent crude LCOc1 settled up 18 cents at $37.87 a barrel, after sinking to a March 4 low of $37.27 earlier. It got to a post-settlement high of $38.44.
Oil finished the session higher on remarks from Kuwait’s OPEC governor that a meeting of oil-producing countries in Doha on April 17 will deliver an agreement to hold output at January highs despite Tehran pouring cold water on the plan.
Iran’s Deputy Oil Minister Marzieh Shahdaei reiterated on Tuesday Tehran’s wish to focus on raising its crude exports to pre-sanction levels. The country is the second largest exporter in the Organization of the Petroleum Exporting Countries and fourth largest oil producer in the world.
Last week, a Saudi prince was reported saying the kingdom will not participate in the production freeze without Tehran’s involvement.
Oil prices were weighed down earlier on Tuesday by government data from Monday showing U.S. gasoline demand fell in January for the first time in 14 months. Gasoline demand has been one of the strongest pillars of U.S. crude for months.
A Reuters analysis, however, showed the January data in line with low weekly consumption numbers that have since rebounded.
