Crude oil prices rose above $61 a barrel Wednesday after a new report showed U.S. inventories dropped last week, OPEC members began taking steps to implement production cuts and Nigerian villagers attacked oil facilities.
Though global supplies are still relatively ample and some skepticism remains about OPEC's willingness to go through with the 1.2 million barrel-a-day reduction it announced late last week, Wednesday's news drove traders to bet on tightening supplies going into the North American winter, when demand for heating oil and natural gas ramps up.
Light sweet crude for December delivery climbed $1.78 to $61.14 a barrel in afternoon trading Wednesday on the New York Mercantile Exchange.
Crude oil stockpiles fell by 3.3 million barrels to 332.3 million barrels, the U.S. Energy Department's Energy Information Administration said Wednesday. Distillate stocks, which include heating oil and diesel fuel, fell by 1.4 million barrels to 144 million barrels, and gasoline supplies dropped by 2.8 million barrels to 207.4 million barrels.
"We still are adequate as total inventories go on crude, but we have seen two decent-sized draw-downs in last two weeks, contrary to expectations," said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York.
Heating oil futures rose 4.23 cents to $1.7735 a gallon on the Nymex, while gasoline futures increased 4.05 cents to $1.57 gallon.
Natural gas futures surged 56.3 cents to $7.654 per thousand cubic feet. Natural gas supply figures from the EIA will be released Thursday.
Crude futures had fallen to an 11-month low below $57 a barrel Friday - even after OPEC decided to reduce its daily production by a larger-than-anticipated amount of 1.2 million barrels - amid doubts about OPEC's ability to implement the decision to cut daily production.
But prices have bounced back up above $60 a barrel - the threshold OPEC ministers said they wanted to maintain - after reports this week that so far, Saudi Arabia, the United Arab Emirates, and Iran have begun informing customers that they are going through with the cuts, according to Dow Jones Newswires. The OPEC agreement reached last week stipulated that Saudi Arabia would cut of 380,000 barrels a day; the United Arab Emirates would cut 101,000 barrels a day; and Iran would cut 176,000 barrels a day.
Bentz said the notifications to major oil companies are significant, adding, "they don't go back on that."
Other market watchers, though, say it's not enough proof that less oil will be put on the market.
"I have no idea that that's going to happen. You could be telling certain customers, and not others. OPEC has hundreds of customers," said Oppenheimer & Co. analyst Fadel Gheit. "Talk is cheap. Oil isn't. These guys have a way of playing with the market. As long as the market is receptive ... they can have their cake and eat it too: high oil prices and high production at the same time."
Meanwhile, in Nigeria, angry villagers stormed and seized three Royal Dutch Shell PLC oil platforms Wednesday in the Niger Delta, forcing oil production to be shut down at each one, a spokesman for the oil company said.
Royal Dutch Shell officials declined to say how much oil had been cut off after the platforms were attacked. Attacks by armed militants in Nigeria have cut more than a quarter of the country's oil exports since the beginning of this year.
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