Crude oil settled above $50 a barrel for the first time since June, pushed higher by solid demand, falling U.S. stockpiles of petroleum products, and OPEC’s promise to cut production.
West Texas Intermediate, the U.S. benchmark for oil, settled at $50.44 barrel in New York, continuing a rally that began Sept. 28 when the Organization of the Petroleum Exporting Countries reached an agreement to cut production by as much as 750,000 barrels a day in an effort to reduce a worldwide glut of oil and raise prices. Prices have climbed more than 10 percent since the deal was announced, but it still must be finalized at OPEC’s formal meeting in Vienna next month.
A steady drop in U.S. crude inventories against a backdrop of growing demand is also supporting prices. The Energy Department reported Wednesday that commercial stockpiles fell by about 3 million barrels last week, the fifth consecutive week of declines. Although still historically high, crude inventories have fallen by more than 40 million barrels since peaking in April, slipping below 500 million barrels last week for the first time since the beginning of the year.
Demand for petroleum products, meanwhile, is rising. U.S drivers consumed an average of 9.3 million barrels a day over the past four weeks, up more than 3 percent from a year earlier. Consumption of all petroleum products, averaging nearly 20 million barrels a day, has also risen from about a year ago.
Oil prices topped $100 a barrel in the summer of 2014, before plunging to a low of about $26 in February. Since hitting bottom, prices have more than doubled as scores of U.S. drillers have filed for bankruptcy or gone out of business, cutting production. U.S. output has fallen by about 700,000 barrels a day since the beginning of the year, according to the Energy Department.
The rebound in prices, however, has sent many companies back to U.S. shale oil fields, where they have put more than 100 rigs back into operation since May, when the rig count hit its recent low of just over 400, according to the Houston oil services firm Baker Hughes.
Among the questions facing markets now is whether higher prices will encourage more U.S. drillers — as well as other non-OPEC producers — to kick up output, offsetting any OPEC cuts. The Wall Street investment bank Goldman Sachs recently forecast that increased production and new supplies will extend the oil glut and keep prices from rising about $55 a barrel in the near future.