(Bloomberg) – Oil rallied with stocks after traders saw a US inventory report showing the largest decline in crude oil storage at the Cushing, Oklahoma storage facility since June.
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New York futures rose 1.1% on Thursday, hitting a new nearly seven-year high, with the stock market approaching its best day since March. Stocks at the nation’s largest storage facility in Cushing declined last week as traders shipped more oil to the US Gulf Coast for export.
“The market is now in a deeply underdeveloped state, so there is no incentive to store crude oil,” said Tariq Zahir, managing member of the global macro program at Tyche Capital Advisors LLC.
However, domestic crude oil inventories rose more than 6 million barrels last week – more than expected – while oil production rose for the fifth straight week, according to a report from the Energy Information Administration. Refineries are entering the peak of the so-called “repair period” when refineries are upgrading equipment and typically using less crude oil.
The rise in oil prices in recent months has been highlighted by the growing gas crisis. The International Energy Agency on Thursday was the latest to say gas shortages in Europe and Asia are driving up demand for crude oil. Banks, including UBS Group AG and Citigroup Inc., raised their oil price forecasts this week due to the switch from gas to oil.
“The shift to petroleum products for power generation is already underway in Southeast Asia and the Middle East and will continue throughout this quarter,” said Shirin Lahani, director of global oil services at Rapidan Energy Group. Countries such as Pakistan, Bangladesh and India are more flexible than Europe in burning different fuels.
Meanwhile, Saudi Arabia’s Energy Minister Prince Abdel Aziz bin Salman reiterated the need for OPEC and its allies to take a gradual, phased approach to increasing supplies.
“We have done a wonderful job,” he said at the Russian Energy Week conference. “The markets for gas, coal and other energy sources need a regulator. This situation tells us that people need to copy and paste what OPEC has done. “
US State Department spokesman Ned Price said the US is holding diplomatic talks with OPEC + members and “is expressing its concerns in confidence.”
“We are concerned and are monitoring the situation very closely,” Price said Thursday during a briefing.
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