Oil rallies as global supplies fall

Oil advanced to its highest intraday level in six months as supply reductions around the world, from the U.S. and Canada to Nigeria, helped whittle away the global surplus.

Futures gained 1.2 percent in New York after climbing 6.4 percent the previous two sessions. U.S. inventories dropped by 3.4 million barrels last week, government data showed Wednesday.

Nigeria said militants have curbed the country’s oil output by about 30 percent. The global surplus in the first half of this year is smaller than previously estimated because of robust demand in India and other emerging nations, the International Energy Agency said.

“The latest figures shout bullish and paint a much tighter market than a month ago,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. With “supply disruptions in West Africa sending Nigeria’s oil production to a 20-year low,” all “that was needed for oil bulls to have a field day was an unexpected draw in U.S. oil inventories. That’s what they got.”

Oil has rebounded after slumping to the lowest level since 2003 earlier this year on signs the global oversupply is easing as U.S. output declines. While a deteriorating security situation has curbed Nigerian supply, gains from Iran and Iraq have helped to boost Organization of Petroleum Exporting Countries production to about 33 million barrels a day.

West Texas Intermediate for June delivery climbed as much as 52 cents, or 1.1 percent, to $46.75 a barrel shortly before 8 a.m. Central time, the highest since Nov. 4 on the New York Mercantile Exchange. The contract was at $46.78 at 1:09 p.m. London time. Total volume traded was about 26 percent above the 100-day average. Prices have gained more than 70 percent since a February low.

Brent for July settlement was 36 cents higher at $47.96 a barrel on the London-based ICE Futures Europe exchange after rising 9.1 percent the previous two sessions. The contract climbed $2.08 to $47.60 on Wednesday. The global benchmark crude was at a 44-cent premium to July WTI.

The IEA estimates global supply will exceed demand by an average of 1.3 million barrels a day in the first six months of the year — down from the 1.5 million it projected a month ago — following surprisingly strong consumption in the first quarter, the agency said in its monthly oil market report. Still, further gains in oil prices “are likely to be limited by brimming crude and products stocks,” it predicted.

Inventories at Cushing, the delivery point for WTI, expanded by 1.5 million barrels to a record 67.8 million, according to a report Wednesday from the Energy Information Administration. Production slid for a ninth week to 8.8 million barrels a day, the lowest since September 2014.