Crude prices soar on decline in U.S. inventories

Crude prices soar on decline in U.S. inventories

Oil futures jumped almost 3 percent on Wednesday on a decline in USA crude inventories and after sources signaled top exporter Saudi Arabia wants to see the crude price closer to $100 a barrel.

Compliance has reached 150 percent, according to OPEC, meaning the organization's members have cut production by about 1.8 million barrels per day, 600,000 bpd more than pledged. US West Texas Intermediate crude futures gained US$1.95, or 2.9 per cent, to settle at US$68.47 a barrel, their highest since late 2014.

An Energy Information Administration report showed shrinking American petroleum surpluses and the first crude withdrawal from the largest USA storage complex in six weeks.

Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation fell up to 7 percent intraday after crude oil prices rallied more than 3 percent on decline in USA crude inventories. The total global supply controlled by OPEC, with Saudi Arabia as its de facto leader, has dropped to 40% in recent years, mainly due to the expansion of United States drilling.

Yields on USA two-year Treasuries stood at levels last visited in 2008 at 2.43 per cent and 10-year German yields went above 0.57 per cent for the first time in nearly a month. US gasoline demand surged to a record high of 9.9 MMbbl a day before the summer driving season when consumption typically peaks.

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Talk that Saudi Arabia has its sights on $80-$100 a barrel oil again ignited a fierce rally in commodities and resource stocks on Thursday, though the potential boost to inflation globally put some pressure on fixed-income assets. The cartel has used its power to manipulate market prices for oil in the past and actually caused their own present heartache when they dumped cheap oil on the global market trying to drive out competition from U.S. frackers, among other reasons.

Sayed said a price of $80 to $100 per barrel could be unrealistic.

Japan's Nikkei faded late in the day to end up 0.15 per cent, but basic materials and utilities both climbed more than 2 per cent. They have extended the pact until December 2018 and meet in June to review policy.

Daniel Lacalle, chief economist at Tressis Gestion, told CNBC on Thursday that "oil prices are high because the dollar is low" and warned that "massive supply management" has always been likely to lead to an "artificial" jump in the price of oil.

The ministers are expected to discuss the five-year average inventory metric on Friday, though the JTC has made no recommendations on this, the sources said.

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