Wednesday, April 6, 2016

Oil prices jump 5% after surprise US crude stockpile draw

 Oil prices surged more than 5 percent on Wednesday, heading for their largest gain in three weeks, after the US government reported a surprise draw in domestic crude stockpiles versus market expectations for a new record high.

Crude stocks unexpectedly fell 4.9 million barrels last week as refineries continued to hike output and imports dropped, the Energy Information Administration reported.
Analysts polled by Reuters had expected inventories to hit record highs for an eighth straight week with a build of 3.2 million barrels.

U.S. crude futures were up $1.85, or 5.1%, at $37.74 a barrel by 12:46 p.m. EDT.

Brent futures rose by $1.98, or 5.2%, to $39.85, gaining more than $2 earlier.

US crude futures found additional support from TransCanada Corp's delayed restart of its 590,000 barrel per day Keystone pipeline that delivers crude to Cushing and Illinois.

US futures' front-month was at its narrowest discount in three weeks to the second month following the outage.

Brent was also underpinned by planned maintenance works at Norway's Ekofisk and Britain's Buzzard oil fields.

The rally represented a sentiment shift in oil after last week's 7 percent drop in US crude futures and 4 percent in Brent amid worries the global glut in oil was growing again while producing countries' plans to freeze output would fail.

The EIA also reported that gasoline stocks rose for the first time in six weeks, potentially snapping a pillar of support to US crude prices. Stockpiles at the Cushing, Oklahoma, delivery hub for US crude futures also rose.

But traders chose to focus on more bullish aspects of the inventory report like the crude draw and the drop in crude imports of nearly 450,000 bpd. "I think the market is more about the total change in (crude) inventories, rather than individual components," said Scott Shelton, energy broker with ICAP in Durham, North Carolina. "It's the first week of the second quarter and we have a net draw. That will force the bears to rethink their bearish balances for Q2."


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