Oil rose on Wednesday, extending its rally for a ninth day, its longest winning streak in two years, supported by producer supply cuts and hopes vaccine rollouts will drive a recovery in demand.
U.S. crude inventories fell unexpectedly in the week, dropping 6.6 million barrels according to the Energy Information Administration, compared with an expected 985,000-barrel increase forecast in a Reuters poll.
Brent crude settled 38 cents, or 0.6%, higher at $61.47 per barrel after touching a 13-month high of $61.61 earlier in the session. U.S. crude settled 32 cents, or 0.55%, higher at $58.68 per barrel, having touched $58.76, also a 13-month high.
“A combination of higher refining activity and lower imports resulted in a fourth consecutive draw to oil inventories, and a chunky one at that,” said Matt Smith, director of commodity research at ClipperData. He cautioned that a build to gasoline inventories offset the bullish draw.
Brent has now risen for nine sessions in a row, its longest sustained period of gains since December 2018 to January 2019. It is the eighth daily rise for U.S. crude. Some analysts say prices have moved too far ahead of the underlying fundamentals.
“The current price levels are healthier than the actual market and entirely reliant on supply cuts, as demand still needs to recover,” said Bjornar Tonhaugen of Rystad Energy.
Crude has jumped since November as governments kicked off vaccination drives for COVID-19 while putting in place large stimulus packages to boost economic activity, and the world’s top producers kept a lid on supply.
Top exporter Saudi Arabia is unilaterally reducing supply in February and March, supplementing cuts agreed by other members of the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+.
Some analysts forecast supply will undershoot demand in 2021 as more people get vaccinated and start going away on trips and working in offices.