Oil Rises on Plan for Output Meeting, Smaller Stockpile Gain

Oil climbed the most in three weeks after some OPEC members agreed to meet with other producers in April for talks on capping production, while U.S. crude stockpiles increased by less than anticipated.

Futures rose 5.8 percent in New York. The oil exporting countries plan to meet on April 17 in Doha to discuss a plan to freeze output, Qatar’s energy minister said. U.S. crude supplies advanced 1.32 million barrels last week, according to government data, less than half the 3.2 million barrels projected by analysts in a Bloomberg survey. Prices surged after the Federal Reserve kept borrowing costs steady and scaled back forecasts of how high rates will go this year.

"The market started moving higher on the setting of a date for the producers meeting, which has actually been a long time in coming," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "We’re also getting some bullish reaction to the smaller-than-expected build in crude inventories."

Oil has rallied more than 30 percent since a mid-February proposal by Saudi Arabia, Russia, Venezuela and Qatar to cap oil output and reduce a worldwide surplus that had seen prices slump to the lowest level in almost 13 years.

West Texas Intermediate for April delivery advanced $2.12 to settle at $38.46 a barrel on the New York Mercantile Exchange . The contract fell to $36.34 on Tuesday, the lowest settlement since March 4. Total volume traded was 22 percent above the 100-day average at 3:25 p.m.

Ample Stockpiles

Brent for May settlement climbed $1.59, or 4.1 percent, to $40.33 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a 33-cent premium to May WTI.

Nationwide crude stockpiles climbed to 523.2 million barrels last week, the highest level since 1930, according to Energy Information Administration data.

"This was a friendly report because inventories rose less than was forecast," said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $3.4 billion. "We’re still on track to see stocks reach 550 million-560 million barrels by the middle of April when the gains stop."

Crude supplies at Cushing, Oklahoma, the biggest U.S. oil-storage hub, rose to a record 67.5 million barrels. The site, which is the delivery point for WTI, has a working capacity of 73 million, according to the EIA.

Production fell by 10,000 barrels a day to 9.07 million, the lowest since November 2014. Rigs targeting oil in the nation’s fields fell to 386 last week, the least since December 2009, Baker Hughes Inc. said on its website March 11.

Refineries reduced operating rates by 0.1 percentage point to 89 percent of capacity. U.S. refiners typically slow during March to perform maintenance before the summer peak driving season. Supplies of gasoline and distillate fuel, a category that includes diesel and heating oil, slipped as demand rose.

"It’s not a large crude inventory build, especially when a lot of refineries are performing maintenance," said Brian Kessens, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $12 billion in energy assets. "When refiners increase utilization to make summer gasoline we could see some big declines."

The Federal Open Market Committee kept the target range for the benchmark federal funds rate at 0.25 percent to 0.5 percent, the central bank said in a statement Wednesday following a two-day meeting in Washington. An increase in oil prices alone won’t have policy significance, Fed Chair Janet Yellen said at a press conference in Washington after the release of the FOMC statement.

"The Fed didn’t do anything to hurt the demand outlook," said Thomas Finlon, director of Energy Analytics Group LLC in Wellington, Florida. "They left things alone, which the market is happy about."

Market rebalancing and revised projections:

• Market will re-balance during 2016, Total SA Chief Executive Officer Patrick Pouyanne said in an interview with Le Progres newspaper.
• Societe Generale SA revised its crude price forecasts lower. The bank trimmed its 2016 WTI projection by $4.30 to $36.20 a barrel. The Brent forecast was cut $4.38 to $38.12 a barrel.

--With assistance from Grant Smith To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Susan Warren, Debarati Roy

By: Mark Shenk

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