Supply squeeze pushes oil price to 3½-year high

Supply squeeze pushes oil price to 3½-year high

Supply squeeze pushes oil price to 3½-year high

Crude futures were already higher ahead of the release after the American Petroleum Institute reported a 1-million-barrels drop on Tuesday afternoon.

E-Mini futures for the S&P 500 were pointing to a steady start in NY later. "Iran, once a keen OPEC price hawk, now wants lower prices than Saudi Arabia", according to Reuters.

Still, the cartel and Kremlin want to drive prices even higher and offset the United States shale oil boom, so they are likely to extend the supply quota plan beyond this year. The U.S. draw-downs underlined optimism that an OPEC-led effort to curb global supplies will be reinforced later this week when the cartel and allied producers gather in Saudi Arabia. While demand has yet to catch up to elevated supplies, rebounding economies in Europe and steady economic growth in the USA could prompt more upside for oil this year.

"It would be foolish to go against the trend at the moment given how bullish the market has turned", said Warren Patterson, commodities strategist at ING Groep. "The market still needs support". Total volume traded was about 21 percent above the 100-day average. The contract rose $1.90/Bbl, or 2.7%, to end the session at $73.48/Bbl. The global benchmark crude traded at a $5.01 premium to June WTI.

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E-Mini futures for the S&P 500 rose 0.1 percent, as did futures for the FTSE.

Oil prices rose on Thursday to their highest since late 2014 as US crude inventories declined, moving closer to five-year averages, and after sources told Reuters that top exporter Saudi Arabia aims to push oil prices higher.

The EIA data also had another surprise.

"The fact that the gasoline inventory reduction was more pronounced than anticipated was due to record-high gasoline demand, which is extremely unusual outside the summer driving season", said Commerzbank analysts in a note. Stockpiles of gasoline fell by nearly 3 MMbbl, compared with a 450,000-bbl increase expected in a Bloomberg survey. While futures in London have broken past the 50 percent Fibonacci retracement of the slump from when they were above $100 in mid-2014, another signal shows the rally could persist to the line just under $82. The cartel has used its power to manipulate market prices for oil in the past and actually caused their own present heartache when they dumped cheap oil on the global market trying to drive out competition from U.S. frackers, among other reasons. Oil's about to have a turn.

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