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Oil Trades Near 5-Month High as U.S. Crude Production Declines – Bloomberg

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Oil traded near the highest level in almost five months after U.S. production dropped to the lowest since October 2014 and Iraq said producers plan a new push to agree on an output freeze in talks as early as next month.

Brent in London added 0.5 percent after rising 6.7 percent over the previous two sessions. Its relative strength index rose to 69 on Wednesday, close to the level that typically signals the market is overbought. U.S. crude output fell to 8.95 million barrels a day in the week ended April 15, the Energy Information Administration reported. Major OPEC and other crude producers will meet in Russia, possibly in May, in an effort to agree on an output cap, Iraq’s Deputy Oil Minister Fayyad Al-Nima said.

Talks to freeze supply between some of the world’s largest producers in Doha on Sunday failed after Saudi Arabia said it wouldn’t restrain output without commitments from all Organization of Petroleum Exporting Countries members including Iran, which has ruled out freezing for now. U.S. production dropped for the 12th time in the last 13 weeks, according to the EIA.

Positive Production

“Yesterday’s production numbers were pretty positive for the oil price,” Angus Nicholson, an analyst at IG Ltd., said by phone. “Given all of these developments and the momentum that we are seeing behind the oil price, especially considering the failure of the Doha deal, $40 may increasingly look like a much stronger floor if we do manage to stay above it for the next week or two.”

Brent crude for June settlement added 18 cents to $45.98 a barrel on the London-based ICE Europe Futures exchange as of 12:29 p.m. in Tokyo. Prices rose $1.77, or 4 percent, to $45.80 on Wednesday, the highest since Nov. 25. Total volume traded was almost double the 100-day average. The global benchmark was at a $1.64 premium to West Texas Intermediate.

WTI for June delivery was at $44.34 a barrel on the New York Mercantile Exchange, up 16 cents. The May contract, which expired Wednesday, increased $1.55, or 3.8 percent, to close at $42.63 a barrel.

Too Low

Oil at $45 a barrel is still too low for U.S. shale producers to be profitable, Fatih Birol executive director of the International Energy Agency, said Thursday. The agency doesn’t see the failure of the Doha talks delaying a market rebalance by the end of this year or 2017, he said.

Iraq sees prices rising slowly despite the failure of the Doha meeting, said Al-Nima. Venezuela isn’t as hopeful and sees oil prices touching new lows within a month due to the failure, Energy Minister Eulogio del Pino said on Wednesday. Russia doubts that there will be a production freeze in the foreseeable future, Energy Minister Alexander Novak said in an interview.

Other oil-market news:

U.S. crude inventories climbed 2.08 million barrels to 538.6 million barrels last week, the highest level since 1930, the EIA data show. A 3 million barrel gain was projected by analysts surveyed by Bloomberg before the report.

Supplies at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, dropped by 248,000 barrels.

Nigeria will push fellow OPEC members for an oil-output freeze when the group holds its next meeting in June, Petroleum Minister of State Emmanuel Kachikwu said on Wednesday.

Petroleo Brasileiro SA says March oil output fell 3 percent from the previous month to 2.02 million barrels a day.