US crude rises 22 cents to 2-week high, settling at $61.90, after report of falling stockpiles
- U.S. crude extended last week's gain into Tuesday, while a firmer dollar dented international Brent crude.
- Overall markets are well supported by ongoing production cuts by OPEC, Russia and their allies.
- Soaring U.S. output threatens to undermine OPEC efforts after American drillers added more rigs for a fourth straight week.
U.S. crude prices rose on Tuesday on signs of inventory declines at a key storage hub and reduced supply from Canada to the United States caused by pipeline reductions.
Meanwhile Brent eased under pressure from a stronger dollar.
Oil prices hit a near two-week high after data from market intelligence firm Genscape showed inventories at Cushing, Oklahoma, the delivery point for U.S. crude futures fell 2.1 million barrels in the week to Feb. 16, traders who saw the data said.
The combination of a new pipeline running from the hub to Memphis, along with reduced flows from TransCanada's Keystone pipeline, have sent stockpiles in Cushing to the lowest in about three years.
Flows on Keystone pipeline were decreased after a leak in November.
U.S. West Texas Intermediate (WTI) crude futures ended Tuesday's session up 22 cents at $61.90 a barrel, ahead of the March contract expiration. Prices rallied to a high of $62.74 a barrel early in the session, the highest since Feb. 7.
The most active U.S. crude futures contract for delivery in April was up 17 cents at $61.72 a barrel.
A strengthening dollar, which hit a six-day high, however, weighed on oil prices. A more robust dollar makes oil and other dollar-denominated commodities more expensive for holders of other currencies.
Brent crude futures were down 45 cents from Monday's close at $65.22 a barrel by 2:25 p.m. ET.
The divergence in prices kept U.S. crude's discount to Brent near a six-month low after widening to more than $7 in December.
Monday's U.S. holiday for Presidents Day also supported WTI's performance compared with Brent, as the U.S. markets caught up with Brent's gains on Monday, said Carsten Fritsch, oil analyst at Commerzbank AG in Frankfurt, Germany.
A narrower premium of Brent to WTI means it is less attractive for consumers in northwest Europe to import U.S. crude, especially with refiners conducting maintenance. Premiums for local North Sea grades are at multi-month lows.
"Market bulls are hopeful that narrowing price premium of Brent over WTI crude will last, which in turn could reduce U.S. supplies coming into Europe and Asia," said Abhishek Kumar, Senior Energy Analyst at Interfax Energys Global Gas Analytics in London.
Overall, oil markets remain supported by supply restraint on the part of the Organization of the Petroleum Exporting Countries (OPEC), which started last year to draw down excess global inventories.
Ayed Al Qahtani, OPEC's head of research, said at an industry conference that the excess of oil held in storage has fallen in the past year to stand 74 million barrels above the five-year average.
This compares with a surplus of around 340 million barrels in January 2017, he said.
"The latest discussions of the Joint Technical Committee of OPEC and non-OPEC nations concluded that the oil stocks are dissipating at a faster pace and the market will now rebalance between 2Q and 3Q," Goldman Sachs said in a daily note.
OPEC and non-OPEC oil producers, including Russia, will discuss extending their cooperation for many more years when they meet in June as they seek to avoid major market shocks, the United Arab Emirates' energy minister told Reuters.