(Bloomberg) -- Crude advanced to the highest this year after a further reduction in supply from OPEC signaled that global markets are tightening.
Futures added 1.6 percent to the highest level since November in New York on Tuesday. Declines in OPEC production are stoking optimism among investors as Saudi Arabia pressed on with output curbs and as power blackouts in Venezuela further squeezed supplies. Meanwhile, U.S. crude stockpiles probably declined by 900,000 barrels last week, according to a Bloomberg survey ahead of a government report on Wednesday.
"The fundamentals that drove us yesterday -- the OPEC production numbers falling, Venezuelan production issues, strong manufacturing numbers and lower U.S. production -- all of that is conspiring to take prices higher," said Phil Flynn, senior market analyst at Price Futures Group Inc. in Chicago.
Oil has rallied more than 30 percent this year as Saudi-led production cuts, together with receding fears over the global economic growth outlook, appear to be easing investor concerns.
West Texas Intermediate for May delivery climbed 99 cents to settle at $62.58 a barrel on the New York Mercantile Exchange. The WTI prompt spread closed at a discount of 3 cents, signaling a narrowing contango, a market structure where contracts in the near-term are cheaper than those further out.
WTI closed above its key 200-day moving average on Tuesday, a closely watched technical level.
Brent for June settlement added 36 cents to end the session at $69.37 a barrel on the London-based ICE (NYSE:ICE) Futures Europe exchange. Brent’s prompt spread settled at 44 cents in backwardation, a market structure where prices in the near term are stronger than those further out. The global benchmark crude’s premium over WTI traded at $6.76 a barrel, the smallest premium since August.
A chemical storage complex near Houston caught on fire last month, partially shutting the local ship channel and causing local refiners in need of crude to dial back production. That will likely cause some uncertainty ahead of supply data from the industry-funded American Petroleum Institute later Tuesday.
Overseas, supply appears to be drying up. Venezuelan production slumped to less than 900,000 barrels a day last month, from around 1 million in February, as blackouts forced the key oil port of Jose to close for almost eight days. Also, the threat of additional U.S. sanctions is hanging over Iranian supply, while the White House is set to decide by early May whether to extend waivers allowing some countries to keep buying oil from the Persian Gulf nation.
