Oil Trades Near Highest Close in Five Months Before OPEC Report

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(Bloomberg) — Oil traded near the highest close since mid-November on signs of a tighter global market as traders waited for a monthly outlook from OPEC.

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West Texas Intermediate held above $83 a barrel after advancing by 4.4% over the prior two days. The gains were driven by another drop in crude inventories at the key Cushing, Oklahoma, storage hub, signs of weaker Russian oil exports, and interruptions to pipeline supplies from Iraqi Kurdistan.

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The Organization of Petroleum Exporting Countries will issue its monthly snapshot later Thursday, offering fresh insight into market balances over 2023 after the cartel and its allies including Russia announced a surprise output cut earlier this month. On Wednesday, Fatih Birol, head of the International Energy Agency, said that demand is likely to top supply in the second half.

Crude has rebounded strongly since hitting a 15-month low in March, with widely watched timespreads pointing to a tightening of conditions. Oil’s swift resurgence has also been supported by signs that US inflation is moderating, potentially enabling the Federal Reserve to pause its rate-hike campaign.

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“Concerns of tighter supply continue to underpin after reports of weakening Russian shipments, OPEC production cuts, and retreating US inventories,” said Charu Chanana, market strategist for Saxo Capital Markets Pte. “Demand-side concerns also eased yesterday as the US CPI report further pointed to May rate hike as ‘one-and-done,’ with signs of disinflation continuing to build.”

WTI’s prompt spread — the difference between its two nearest contracts — flipped back into backwardation this month, a bullish pattern. For global benchmark Brent, the December-December differential is approaching $6 a barrel in backwardation, up from about $4 a barrel a month ago.

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