Oil’s Rally Takes Breather as Traders Turn Gaze to Stockpiles

(Bloomberg) -- Oil edged lower after capping the longest winning run in more than four years as OPEC+ leaders extended supply cuts to the end of 2023.

West Texas Intermediate fell toward $87 a barrel after posting nine straight daily gains, the longest stretch of advances since January 2019. That surge, which propelled futures into overbought territory, came as Saudi Arabia and Russia pledged to prolong their export curbs through the fourth quarter.

Traders will get an official snapshot of US inventories later Thursday. Ahead of that, the industry-funded American Petroleum Institute reported that crude inventories fell by 5.5 million barrels last week, according to a person familiar with the figures. The breakdown also recorded a drop in oil holdings at the key Cushing, Oklahoma, storage hub, as well as a big decline in gasoline stockpiles.

Oil’s resurgence means that prices are now about 9% higher this year, with WTI trading near the highest level since November 2022. Improving demand prospects have also helped to buoy prices, with top traders at a conference in Singapore this week optimistic on the outlook for consumption in China.

“Supply dynamics are tight,” said Vishnu Varathan, Asia head of economics and strategy for Mizuho Bank Ltd. The shifting perspective on China “from gloom to incremental optimism is not denied, but that does not defy pre-existing dampeners,” including a stronger US dollar, he said.

The US currency is on course for an eighth weekly gain, pushing a Bloomberg gauge of the greenback to the highest since March. The ascent makes commodities more expensive for overseas buyers.

The market’s widely-watched timespreads still signal tightness, with the backwardation widening in tandem with the gains in futures. The six-month spread for global benchmark Brent expanded to $4.40 a barrel in backwardation this week, compared with a low of $2.54 a barrel last week.

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