U.S. oil prices surge as stockpile plunges
Benchmark WTI finally breaks through $50 a barrel range
Oil surged on Wednesday to the highest level in a month — breaking out of a weekslong holding pattern — as the Energy Department said U.S. crude stockpiles tumbled last week to their lowest level since February.
West Texas Intermediate, the U.S. benchmark, rose by $2.97 to settle at $63.15 after trading in the $50 range for weeks, giving some analysts reason to predict still higher prices.
“There’s always bearish factors in any market, but now that we’ve broke out to the upside, it likely means we’re going to retest the old highs, if not go through them,” said Bill O’Grady, executive vice president at Confluence Investment Management in St. Louis.
The nation’s commercial crude inventories dropped by 5.9 million barrels to 492.4 million barrels for the week ended April 7, according to the Energy Information Administration’s weekly report. Commercial crude supplies, which don’t include oil stored in the nation’s strategic petroleum reserve, are now just 1 percent higher than the five year average for this time of year.
The U.S. report comes as the International Energy Agency cited declining global supplies in raising forecasts for global oil demand this year as the economy recovers from the pandemic.
“The massive overhang in global oil inventories that built up during last year’s COVID-19 demand shock is being worked off, vaccine campaigns are gathering pace and the global economy appears to be on a better footing,” the agency said in its monthly report.
IEA estimates for this year’s
growth in oil consumption put the world on track to recover about two-thirds of the demand lost last year when the pandemic brought most global economies to a standstill.
Still, crude markets may face a temporary lull as renewed virus outbreaks in India and Brazil erode fuel demand, while OPEC and its allies revive some of the output they halted during the slump.
“Prices could yet come under renewed pressure in the coming months with world oil supply set to ramp up and shift the market from deficit toward balance,” said the Paris-based agency, which advises most major economies.
The 23-nation OPEC+ alliance led by Saudi Arabia and Russia surprised traders earlier this month by announcing it would return about 2 million barrels a day of shuttered output over the next three months.
In the U.S. last week, refineries took in an average of 15.1 million barrels a day last week, about 7,000 barrels a day more than the previous period, the Energy Department said. The increase lifted refinery operations to about 85 percent of capacity.
The refineries increased gasoline production by 300,000 barrels last week, as average daily production rose to 9.6 million barrels from 9.3 million barrels a week earlier.