Oil Ends Sharply Higher After Unexpected U.S. Inventory Drop
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The U.S. oil benchmark scored its biggest one-day jump in three weeks Wednesday after weekly government data showed a large and unexpected fall in U.S. crude inventories and an increase in demand by refineries.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May CLK6, -1.64% advanced $1.86, or 5.2%, to close at $37.75 a barrel. The jump was the biggest since March 16. June Brent crude LCOM6, -2.03% on London’s ICE Futures exchange rose $1.97, or 5.2%, to finish at $39.84 a barrel.
The Energy Information Administration said oil inventories fell by 4.9 million barrels in the week ended April 1. Analysts surveyed by oil data firm Platts had forecast an inventory rise of 2.9 million barrels. Oil futures, however, had already found support after closely watched data from the American Petroleum Institute, an industry trade group, late Tuesday reportedly showed a 4.1 million barrel drop.
The decline was the biggest for this week of the year since at least 1997, according to Bespoke Investment Group. In addition, the data showed U.S. refineries used over 16.4 million barrels a day on average, up 199,000 barrels from a week earlier. Refiners operated at 91.4% of operable capacity last week, the data showed.
The refinery data, in particular, cheered market bulls, said Robert Yawger, director of energy futures at Mizuho Securities. Capacity utilization has risen strongly for two weeks in a row, and at above 90% is fueling ideas that refiners may be wrapping up their traditional spring “turnaround season” a bit early in anticipation of strong gasoline demand this summer, he said.
Oil futures had previously found support on revived hopes that key global producers may agree to a production freeze later this month despite an escalating tussle between Iran and Saudi Arabia over the issue.
Prices rose after Kuwait, a heavyweight in the Organization of the Petroleum Exporting Countries, expressed confidence that players within and outside the bloc will move ahead with the proposal to limit crude output.
Oil prices have been range-bound for months on speculation of a possible production freeze. Some analysts say that even if an agreement is reached at the Doha meeting on April 17, the move is unlikely to make any significant dent given persistent oversupply. Others view it as a step toward rebalancing the market.
However, sentiment fell last week after Saudi Arabia, OPEC’s largest producer and one of the original initiators of the plan, said Friday it would back out unless Iran is on board. Tehran plans to increase output until it reaches presanction levels of around 4 million barrels a day.
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