Oil is on a charge, surging on news that production in the USA fell to its lowest levels in 18 months.
Both major oil benchmarks, West Texas Intermediate and Brent crude, have popped more than 2%, as the news of the production drop gave another suggestion to investors that the market may be on its way to balancing. Both major benchmarks are now at or above the $45 per barrel mark. Here’s how things look in the markets right now:
Oil’s charge on the day is being led by data from the US Energy Information Administration (EIA) released on Wednesday that showed oil production in the country has fallen to its lowest level since September 2014. US production decreased by 113,000 barrels per day last week, marking the biggest weekly decline in output since last July. US domestic output has now fallen for 11 consecutive weeks.
That further fall in production suggests that the markets are going someway to addressing the supply/demand imbalance that has plagued markets and caused prices to fall from more than $100 per barrel in 2014 to as low as $27 in January.
Oil was also given an extra boost after, as Accendo Markets’ Mike van Dulken says: “Wildfires in Canada were seen to affect production there, while an escalation of violence in Libya did the same on this side of the pond.”
Despite the good news from the EIA, oil inventories actually continued to grow last week. The EIA’s Weekly Petroleum Status Report showed that U.S. commercial crude inventories increased by 2.8 million barrels for the week ending April 29.