Oil resumed a rally after an industry estimate pointed to a huge drawdown in US inventories, adding to signals the market is tightening.
(Bloomberg) — Oil resumed a rally after an industry estimate pointed to a huge drawdown in US inventories, adding to signals the market is tightening.
West Texas Intermediate climbed near $82 a barrel. The American Petroleum Institute reported that nationwide crude stockpiles plunged 15.4 million barrels last week, according to people familiar with the figures. If confirmed by government data later Wednesday, that would be the biggest draw in volume terms in figures going back to 1982.
The API estimates also pointed to another drop in crude holdings at the key storage hub of Cushing, Oklahoma, as well as declines in inventories of gasoline and distillates.
Crude soared in July after the Organization of Petroleum Exporting Countries and its allies cut supplies. That’s spurred calls from players including BP Plc that the market is set to strengthen in the coming months.
“The visible tightness has convinced the market that announced cuts are not just empty rhetoric,” said Nitesh Shah, an analyst at WisdomTree. “Market optimism that we are nearing the end of a rate-tightening cycle and that an economic soft-landing could easily be achieved has also helped oil prices gain.”
Widely watched metrics are strengthening. The gap between the US oil benchmark’s two nearest contracts is the widest backwardation since November. The spread between its two closest December contracts is approaching $6 a barrel in backwardation, up from about $2 five weeks ago.
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