Oil prices surged, reaching a high of US$51.73 per barrel. This was supported by API data which reported a decline of 1.5 million barrels in US supplies.
Oil futures rose slightly on Wednesday, building on a week’s of gains ahead of a looming decision on output cuts by major producers and prospects of falling U.S. supplies.
Oil prices were higher in European trading on Wednesday, trying for their sixth straight session of gains on the likelihood that OPEC will extend production cuts for another 9 months when it meets on Thursday.
The U.S. West Texas Intermediate crude July contract added 25 cents, or around 0.49%, to $51.73 a barrel by 2:36pm Pakistan Time). The U.S. benchmark settled higher for the fifth straight session on Wednesday after hitting its strongest since April 19 at $51.79.
The American Petroleum Institute, a private industry group, said late Tuesday in the U.S. that crude and gasoline stockpiles declined last week. Drops are also anticipated to be seen in later Wednesday’s government report.
Oil ministers from the Organization of Petroleum Exporting Countries and other major producing countries will meet in Vienna on Thursday to decide whether to extend their current production agreement beyond a June 30-deadline.
In November last year, OPEC and 11 other non-OPEC producers, including Russia, agreed to cut output by about 1.8 million barrels per day between January 1 and June 30.
Most market analysts expect the oil cartel to extend output cuts for a further nine months until March 2018, instead of six months as previously expected.
There is also talk that OPEC is looking at the option of deepening current production cuts, but it is not clear whether there would be support for that.
So far, the production-cut agreement has had little impact on global inventory levels due to rising supply from producers not participating in the accord, such as Libya, and a relentless increase in U.S. shale oil output.
Analysts expect crude oil inventories dropped by around 2.4 million barrels at the end of last week, while gasoline supplies are seen decreasing by about 1.1 million barrels and distillates are forecast to fall by 743,000 barrels.