Oil prices boosted by falling inventories, Saudi warning to speculators

Price action

• West Texas Intermediate crude for July delivery
  CL00,
  +1.55%

  CL.1,
  +1.55%

  CLN23,
  +1.55%
  rose $1.21, or 1.7%, to $74.12 a barrel on the New York Mercantile Exchange.

• July Brent crude
  BRN00,
  +1.46%

  BRNN23,
  +1.46%,
  the global benchmark, was p $1.13, or 1.5%, at $77.97 a barrel on ICE Futures Europe.

• Back on Nymex, June gasoline
  RBM23,
  +1.26%
  rose 1.4% to $2.699 a gallon, while June heating oil
  HOM23,
  +1.27%
  gained 1.2% to trade at $2.39 a gallon.

• June natural gas
  NGM23,
  +2.15%
  was up 0.2% at $2.326 per million British thermal units.

Market drivers

The American Petroleum Institute late Tuesday reported a 6.8 million barrel drop in U.S. crude inventories last week, according to a source citing the data, while gasoline stocks declined 6.4 million barrels and distillates declined 1.8 million barrels.

The EIA will release its official inventory readings Wednesday morning. Analysts surveyed by S&P Global Commodity Insights, on average, expect crude supplies to fall by 500,000 barrels, while gasoline was expected to show a fall of 800,000 barrels and distillates were forecast to come in unchanged.

Crude prices were lifted Tuesday after Prince Abdulaziz bin Salman, Saudi Arabia’s energy minister, warned short sellers of pain ahead, recalling the spike in prices that followed OPEC+’s early April announcement of unexpected production cuts. OPEC+ ministers are slated to meet in Vienna in early June.

See: Top Saudi official says oil speculators better ‘watch out’

“In summary, bin Salman gave a clear hint that OPEC is preparing to announce another output cut when it meets at the beginning of June,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, in a note.

“There is a good chance that the oil bears will gently turn neutral into the OPEC announcement, and that we will see the price of a barrel test the 50 and 100-[day moving average] to the upside,” she wrote.

The 50-day moving average for WTI stood at $74.42 a barrel on Wednesday, according to FactSet, with the 100-day at $75.95.

“But it’s important to note that any OPEC-induced boost to oil prices will likely remain short lived. The 200-DMA, which stands a touch below the $80 [a barrel] level, will likely continue act as a solid resistance to any rally in the short run,” the analyst said.