Oil was steady after an unexpected drop in U.S. stockpiles spurred the biggest gain in two weeks yesterday.
Futures climbed 0.3 per cent in New York after rising 1.5 per cent yesterday. U.S. crude stockpiles shrank by 3.06 million barrels to 382.4 million in the week ended Jan. 2, the Energy Information Administration said yesterday. A median increase of 700,000 barrels was projected in a Bloomberg survey. Credit Suisse Group AG cut its forecast for this year's increase in U.S. crude output by 500,000 barrels a day.
"We were due for a minor correction upwards," Michael Poulsen, an analyst at Global Risk Management Ltd. in Middelfart, Denmark, said by e-mail. "On an isolated basis, crude draws were mildly bullish. Intraday fluctuations of 3 per cent seem to be the temporary new normal."
Oil's collapse has been so rapid and so driven by sentiment that forecasters from Bank of America Corp. to UBS AG say there are no clear signs of when the rout will end. The U.S. is pumping the most crude in more than three decades as horizontal drilling and hydraulic fracturing unlock shale reserves, adding to a global supply glut that Qatar estimates at 2 million barrels a day.
West Texas Intermediate for February delivery was up 19 cents at $48.84 a barrel in electronic trading on the New York Mercantile Exchange at 12:36 p.m. London time. The contract increased 72 cents to $48.65 yesterday. The volume of all futures traded was about 18 per cent above the 100-day average for the time of day.
Brent for February settlement was 20 cents, or 0.4 per cent, higher at $51.35 a barrel on the London-based ICE Futures Europe exchange. It increased 5 cents to $51.15 yesterday. The European crude benchmark's premium to WTI was little changed at $2.53.
Current prices aren't sustainable in the long term and there may be "attractive trading opportunities" over the coming 12 months, Andrew J. Hall, the head of hedge fund Astenbeck Capital Management, wrote in a Jan. 2 letter to investors obtained by Bloomberg News. Oil will remain under pressure this year, according to the letter.
U.S. output expanded to 9.14 million a day through Dec. 12, the highest level in weekly data from the Energy Information Administration that started in January 1983. Growth may slow by 800,000 barrels a day in 2016 compared with its previous estimate, David Hewitt, the co-head of global oil and gas equity research at Credit Suisse, said at an investor conference in Singapore today.
Credit Suisse had previously expected U.S. production to accelerate by 1.3 million barrels a day in 2015, and 1.4 million next year, he said. Brent crude will average $75 a barrel this year and $80 in 2016, according to Hewitt.
U.S. crude exports climbed 34 per cent to 502,000 barrels a day in November, the most in records dating back to 1920, data from the Census Bureau and the EIA show. Some lawmakers in Washington are seeking to end a 40-year-old law that restricts crude sales to just a few overseas markets.
"It's no longer a one-way bet," Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings Inc., said by phone today. "People finally realized that oil prices have been oversold. This should be a technical rebound, but I don't think it will bring us to above $60."