Oil rose to the highest closing price this year as slowing flows from Russia, production cuts by OPEC+ and falling U.S. inventories pointed to a tightening market.

West Texas Intermediate settled above US$83 a barrel, bolstered by a broader relief rally triggered by signs of moderating U.S. inflation. Russian shipments slid below 3 million barrels a day for the first time in eight weeks, after Moscow vowed to cut production. And, in the U.S., oil inventories at the key Cushing, Oklahoma, storage hub slid for a sixth week to hover near the lowest since January.

The oil market’s structure is also signaling strength as WTI’s prompt spread — the difference between its two nearest contracts — is at 17 cents in backwardation, the highest this year on a closing basis. WTI’s move into backwardation and the pace of the changes across the futures curve recently are bullish signals for algorithm-driven traders to take up long positions, said Ilia Bouchouev, a former trader and an adjunct professor at New York University.

The combination of algo traders piling in and declining inventories sets the stage for stronger prices heading into the summer, he added.

Crude has rebounded from the 15-month low seen in March after the Organization of Petroleum Exporting Countries and its allies announced plans to cut output. Traders are also sticking to the view that Chinese demand will pick up. In the Middle East, pipeline flows from Iraq’s semi-autonomous Kurdistan region remain halted.

Prices:

• WTI for May delivery rose $1.73 to settle at $83.26 a barrel in New York.
• Brent for June settlement gained $1.72 to settle at $87.33 a barrel.