Oil increased after the Saudi Arabian oil minister’s comments on stronger demand countered signs that U.S. supplies will keep rising.
Brent crude rose as much as 2.6 percent in London, while futures climbed 2 percent in New York. Oil demand is growing and the market has turned “calm,” Saudi Arabia’s Oil Minister Ali Al-Naimi said. A government report showed U.S. crude supplies climbed last week as refineries reduced operating rates and fuel supplies slipped.
Expanding U.S. stockpiles are exacerbating a global glut that drove prices almost 50 percent lower in 2014. Crude supplies increased 8.43 million barrels to 434.1 million last week, the most in records compiled since August 1982 by the Energy Information Administration. A gain of 4 million was the median of 10 analyst estimates in a Bloomberg survey.
“When looking at oil, rule No. 1 is listen to the Saudis and so are rules No. 2, 3 and 4,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $16.9 billion, said by phone. “He’s correct about the situation improving. Demand is picking up and the rig count in the U.S. is falling.”
Brent for April settlement increased $1.38, or 2.4 percent, to $60.04 a barrel on the London-based ICE Futures Europe exchange at 1:16 p.m. in New York. The volume of all futures traded was close to the 100-day average.
West Texas Intermediate oil for April delivery rose 73 cents, or 1.5 percent, to $50.01 a barrel on the New York Mercantile Exchange. Volume was up 27 percent from the 100-day average. The U.S. benchmark crude traded at a $10.03 discount to Brent. It reached $10.24 on Feb. 23, the widest since March.
“Since the beginning of the month the spread has widened back to about $10,” Thummel said. “The biggest factor driving it now is U.S. inventories which are at the highest levels in more than 80 years.”
Global demand is growing, Al-Naimi told reporters. The world’s biggest oil exporter led the Organization of Petroleum Exporting Countries in its Nov. 27 decision to maintain output amid surging U.S. shale production.
“We want to see calm markets,” Al-Naimi told reporters after a speech at a conference in Jazan in the nation’s southwest. Saudi Arabia will remain the largest oil exporter, he said.
Libya’s Sarir and Mesla oil fields, which restarted Feb. 22 after being damaged by a fire, were halted Tuesday and remain shut, Khalifa Mazeq, inspector at Hariga oil port, said by phone. Libya produced 300,000 barrels a day of crude last month, down from 450,000 a day in December as fighting disrupted operations at oil fields and terminals, according to data compiled by Bloomberg.
“Brent is in the lead today, which signals we’re moving on something from outside the U.S.,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by phone. “There were the comments from Naimi and Libya’s Mesla field is still shut.”
U.S. crude inventories have climbed about 20 percent above the five-year average level for this time of the year, according to the EIA, the Energy Department’s statistical arm.
Crude output rose 5,000 barrels a day to 9.29 million last week, the highest level in EIA weekly estimates that started in January 1983. The combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies from shale formations in the central U.S.
Inventories of crude at Cushing, Oklahoma, the delivery point for WTI traded in New York, climbed 2.42 million barrels to 48.7 million, the highest level since June 2013, according to the EIA, the Energy Department’s statistical arm. Supplies in the Midwest, known as PADD 2, advanced 1.93 million barrels to a record 130 million last week.
Refineries operated at 87.4 percent of their capacity, down from 88.7 percent the prior week. U.S. plants typically schedule work for late winter, when they move from maximizing distillate output to producing gasoline.
“We’re in turnaround season and can expect to see big crude builds week-to-week,” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “The stock builds should continue through March and into the second quarter and eventually trigger another wave of downward pressure.”
Supplies of gasoline fell 3.12 million barrels to 240 million. Inventories of distillate fuel, a category including diesel and heating oil, declined 2.71 million to 124.7 million.
March ultra low sulfur diesel climbed 4.39 cents, or 2.2 percent, to $2.0728 a gallon. Gasoline futures for March delivery rose 5.5 cents, or 3.4 percent, to $1.6752 a gallon.
Regular gasoline at U.S. pumps is rising after slipping to the lowest level since April 2009 last month. The average retail price advanced 1.6 cents to $2.328 a gallon Tuesday, according to AAA, the nation’s biggest motoring group.
President Barack Obama vetoed a Republican-backed bill to approve the Keystone XL pipeline that would have the capacity to carry 830,000 barrels a day of crude from oil sands in Alberta, Canada to the U.S. Gulf Coast via Montana, South Dakota and Nebraska. Obama rejected the bill because it interfered with a review being led by the State Department, White House spokesman Josh Earnest said Tuesday.
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