Oil rose in early trade on Wednesday on expectations global oil stocks will fall back to more normal levels this year and as U.S. lawmakers moved closer to approving President Joe Biden’s $1.9 trillion COVID-19 aid bill without Republican support.
U.S. West Texas Intermediate (WTI) crude futures climbed 11 cents, or 0.2%, to $54.87 a barrel at 0130 GMT, in a third straight day of gains. The benchmark hit a one-year high of A$55.26 on Tuesday.
futures rose 16 cents, or 0.3%, to $57.62 a barrel, in a fourth straight day of gains after hitting $58.05 on Tuesday, its highest in more than 11 months.
Analysts said the market was buoyed by the latest assessment by the Organization of the Petroleum Exporting Countries and allies, together known as OPEC+, that oil stockpiles will decline to below a five-year average by June.
That showed the producers’ output cuts were succeeding in bringing the market back into balance.
“The strategy was very clear. OPEC and allies set out to cut a deal that would normalise global excess inventory through 2021 – well, they’re on track,” said Lachlan Shaw, head of commodity research at National Australia Bank .
OPEC+ expects output cuts will keep the market in deficit throughout this year, peaking at 2 million barrels per day in May, even though it revised down its outlook for demand growth, a document seen by Reuters on Tuesday showed.
Further supporting the market, industry data after the market closed on Tuesday showed and gasoline inventories fell unexpectedly.
The American Petroleum Institute, an industry group, reported U.S. crude oil inventories fell by 4.3 million barrels in the week to Jan. 29, compared with analysts’ expectations in a Reuters poll for a build of 446,000 barrels.
Gasoline stocks fell by 240,000 barrels, defying analysts’ expectations for a build of 1.1 million barrels, while distillate inventories, which include and jet fuel, fell by 1.6 million barrels, a bigger draw than expected.
U.S. government data is due at 1530 GMT from the Energy Information Administration.
Analysts said while there are still short-term risks around demand due to the spread of COVID-19, vaccines are being rolled out successfully and should lead to lockdowns being eased and people moving around more.
“So I think that’s certainly buttressing demand hopes, together with impacts from stimulus,”.