Oil heads for longest gain in a month as US supply seen lower

Bloomberg

Oil advanced for a fourth day in New York, its longest run
of gains in a month, on
estimates that US crude inventories continued their decline from record levels seen earlier this year.
Futures added as much as 1.2 percent after rising 2 percent in the previous three sessions. Inventories probably dropped by 2.25 million barrels last week, a Bloomberg survey shows before an Energy Information Administration report on Wednesday. As crude stockpiles have declined from their March peak, US output has kept rising and shale producers in the Permian basin will be able to make money even if the price falls to the mid-$20s, according to Scott Sheffield, chairman of Pioneer Natural Resources Co.
Oil tumbled into a bear market last week on concerns that expanding global production will counter output cuts from the Organization of Petroleum Exporting Countries and partners including Russia.
While US crude stockpiles have fallen by 26 million barrels since March, they remain 100 million above the five-year average and drillers have added rigs for the longest stretch in at least three decades.
“What we need, to see prices moving higher, are inventory declines, particularly in the US,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “A reversal for oil could trigger a short-covering rally. It will depend on the weekly US inventory data.”
West Texas Intermediate for August delivery was at $43.75 a barrel on the New York Mercantile Exchange, up 37 cents, at 9:37 a.m. in London. Total volume traded was in line with the 100-day average. The contract rose 37 cents, or 0.9 percent, to $43.38 on Monday. Prices are down about 10
percent this month, the
worst June performance in almost 30 years.
Brent for August settlement was 41 cents higher at $46.24 a barrel on the London-based ICE Futures Europe exchange. The contract added 29 cents, or 0.6 percent, to $45.83 on Monday. The global benchmark crude traded at a premium of $2.52 to WTI.
Weekly US crude stockpiles peaked at a record 535.5
million barrels in the week ended March 31, according to EIA data. While inventories have steadily declined, American oil production has climbed above 9.3 million barrels a day to the highest level since August 2015.
The Permian has at least another 25 years to go before its oil gushers start dwindling, Pioneer’s Sheffield said in Washington. Oil prices are likely near the bottom, but “badly damaged sentiment and a rising rig count will dent recovery,” Citigroup Inc. analysts including Ed Morse wrote in June 26 report.