Oil Steadies After Surge With Supplies and Stockpiles in Focus

(Bloomberg) -- Oil held near the highest close since January as traders tracked supply constraints and a US industry report pointed to another decline in crude holdings at the nation’s key storage hub.

West Texas Intermediate traded above $81 a barrel after rallying by 2.2% on Tuesday. Shipments from Russia have weakened after Moscow vowed to reduce production, according to tanker-tracking data. In the Middle East, meanwhile, pipeline flows from Iraq’s semi-autonomous Kurdistan region remain halted.

The industry-funded American Petroleum Institute reported that crude holdings at Cushing, Oklahoma, contracted by 1.4 million barrels last week, according to people familiar with the data. If confirmed by government figures later on Wednesday, that would be a sixth consecutive drawdown.

Crude has rebounded from a 15-month low hit in March after the Organization of Petroleum Exporting Countries and its allies cut output, US crude holdings declined, and traders stuck to the view that Chinese demand will pick up. The gain on Tuesday came ahead of US consumer price data that’ll shape investors’ expectations for the Federal Reserve’s next move, and appetite for risk.

“Oil remains relatively well-supported on the back of expectations that the market will tighten following OPEC+ cuts,” said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. “However, in the immediate term, all attention will likely be on today’s US CPI data. Clearly, any surprises to the upside could prove negative for risk assets.”

Key timespreads suggest that the oil market is tightening. WTI’s prompt spread — the difference between its two nearest contracts — has swung to 6 cents a barrel in backwardation. That’s the widest this year on a closing basis.

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