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Oil surges above $75 as supply outages outpace OPEC

Bloomberg logoBloomberg 7/3/2018 Jessica Summers

Crude soared above $75 a barrel in New York for the first time since 2014 on signs global supply outages outweigh OPEC’s pledged production rise.

Futures in New York jumped as much as 1.7 percent. Even as U.S. President Donald Trump -- facing sky-high retail gasoline prices ahead of midterm elections -- pushes Saudi Arabia to boost output more than it planned, outages around the world from Libya to Canada and Venezuela are keeping prices elevated. U.S. crude stockpiles, already the lowest since January, are expected to tighten further.

The market “is anticipating a very bullish number” in Thursday’s inventory report, said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “All eyes will be on that Cushing number.”

Oil is surging as the U.S. pushes allies to end imports of Iranian crude, as global supply disruptions persist and American crude inventories are already at the lowest since January. Morgan Stanley raised its Brent crude forecast to $85 a barrel through to the third quarter of 2019, citing a tighter market than previously anticipated.

West Texas Intermediate crude for August delivery jumped $1.19 to $75.13 a barrel on the New York Mercantile Exchange.

The premium for near-term U.S. oil over longer-dated contracts increased as analysts forecast continued shrinking supplies in the key Cushing, Oklahoma, supply hub. The prompt WTI spread was at $2.41 on Tuesday after closing at its widest since 2014 on Monday.

Brent for September settlement advanced $1.05 to $78.35 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $5.64 premium to WTI for September.

U.S. crude stockpiles are forecast to have declined 5 million barrels last week, according to a Bloomberg survey ahead of government data released on Thursday. Inventories at Cushing fell 2 million barrels last week, according to a separate forecast compiled by Bloomberg.

The industry-funded American Petroleum Institute will release its weekly tally of inventories later on Tuesday.

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