Oil price stays above $50/b supply shrinking

Oil traded near the highest close in more than 10 months before U.S. government data forecast to show crude stockpiles dropped for a third week, trimming a glut.

“The much-anticipated rebalancing of supply and demand now seems within reach,” Trafigura Group  CEO Jeremy Weir said in the trading firm’s first-half report

Futures were little changed in New York after advancing 2.2 percent on Monday, the biggest gain in three weeks. Inventories declined by 3 million barrels through June 3, according to a Bloomberg survey before data from the Energy Information Administration on Wednesday.

Eni SpA said 65,000 barrels a day of supply was halted Friday after a militant attack in Nigeria.

Crude has surged about 90 percent from a 12-year low earlier this year amid unexpected disruptions and a continuous slide in U.S. output, which is under pressure from the Organization of Petroleum Exporting Countries’ policy of pumping without limits. Saudi Arabia will maintain the same level of production capacity until 2020 under a new economic reform plan approved by the government to reduce its reliance on oil.

“U.S. crude production is trending lower,” which is “gradually bringing down the surplus production and putting an end to stockpiling,” Jens Naervig Pedersen, an analyst at Danske Bank A/S in Oslo, said by e-mail. “This is an underlying supportive factor, which should continue to provide fundamental support the coming year.”

West Texas Intermediate for July delivery was at $49.79 a barrel on the New York Mercantile Exchange, up 10 cents, at 9:24 a.m. London time. The contract gained $1.07 to $49.69 on Monday, the highest close since July 21. Total volume traded was about 44 percent below the 100-day average.

Brent for August settlement rose 10 cents to $50.65 a barrel on the London-based ICE Futures Europe exchange. Prices on Monday closed at the highest since Oct. 9. The global benchmark crude traded at a premium of 39 cents to WTI for August.

For a story on the cost of Saudi Arabia’s energy projects, click here.

Crude stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, probably declined by 700,000 barrels last week, according to the median estimate in a Bloomberg forecast. Nationwide inventories dropped by 1.37 million barrels to 535.7 million through May 27, according to the EIA.

Oil-market news:

• In the meantime, Saudi Arabia will maintain output capacity at 12.5 million barrels a day in 2020, according to a draft of the National Transformation Program distributed to reporters in Jeddah.