Crude extended gains after industry data showed U.S. inventories declined, while Iran cautiously supported a proposal by Saudi Arabia and Russia to freeze production at near-record levels.
Oil rose as much as 4.3 percent in New York. U.S. crude supplies fell by 3.26 million barrels last week, the industry- funded American Petroleum Institute was said to report Wednesday. However, a Bloomberg survey projected Energy Information Administration data Thursday is projected to show stockpiles climbed 3.5 million barrels. While Iran welcomed the output freeze, Oil Minister Bijan Namdar Zanganeh didn’t say whether the nation would curb its own output, according to a report from the Shana news service.
“If the EIA numbers come out anywhere near the APIs it will be supportive,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There seems to be relief and a feeling that the bottom has been put into the market. I think the market might be getting ahead of itself because nothing has been done to tackle oversupply.”
Oil is still down about 15 percent this year after the Organization of Petroleum Exporting Countries abandoned output targets in early December and U.S. crude inventories swelled. Zanganeh didn’t mention if Iran, the second-biggest OPEC producer before sanctions were intensified in 2012, would deviate from plans to boost exports after the lifting of restrictions last month.
West Texas Intermediate for March delivery rose $1, or 3.3 percent, to $31.66 a barrel at 9:10 a.m. on the New York Mercantile Exchange. The contract advanced 5.6 percent to $30.66 on Wednesday. Total volume traded was 27 percent above the 100- day average.
The S&P GSCI Crude Oil Index on Wednesday capped a 14 percent advance over three sessions, the most since August 2015, signaling prices may be near the bottom, Jodie Gunzberg, the global head of commodities at S&P Dow Jones Indices, said in a note. Brent for April settlement increased 96 cents, or 2.8 percent, to $35.46 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a $1.50 premium to WTI for April delivery.
Implementation of the freeze remains unclear because Saudi Arabia and Russia said their commitment depends on other nations participating. Iran’s cooperation is crucial to the success of the plan to halt the fall in prices, according to Daniel Yergin, vice chairman of IHS Inc. The pact will have “little impact on the oil market as proposed, while there remains high uncertainty that it even materializes,” said Goldman Sachs Group Inc.
Iran is seeking to boost output by 1 million barrels a day and regain market share. The nation should increase production by 500,000 barrels a day by March 20, the end of the Iranian calendar year, Shana reported on Wednesday, citing Roknoddin Javadi, managing director of National Iranian Oil Co. Iraq has already expanded output 70 percent in the past five years as investment flowed into its industry after years of conflict and neglect.
U.S. crude stockpiles are forecast to have increased again last week to remain above 500 million barrels, the highest level since 1930, according to data compiled by the EIA.