U.S. oil prices rose to a two-month high Wednesday after a weekly report showed U.S. inventories of crude oil dropping to a 3½-year low.
Light, sweet crude for October delivery closed 1.8% higher at $71.12 a barrel on the New York Mercantile Exchange, for its fifth rise in the past seven sessions and the highest closing level since July 10. Brent crude, the global benchmark, rose 0.5% to $79.40 a barrel.
The Energy Information Administration reported Wednesday that U.S. crude oil stockpiles fell by 2.1 million barrels last week to 394 million barrels. That marks a fifth straight weekly decline and is the lowest total since February 2015. It is also 142 million barrels less than a record-high inventory of 536 million barrels in March 2017, when the yearslong oil downturn was in full swing. Gasoline stockpiles also declined last week, by 1.7 million barrels.
Analysts said the continued drop in oil stockpiles even though the summer driving season is in the rearview mirror is partly a result of rising U.S. crude oil exports, which have been helped in recent weeks by a widening differential between U.S. benchmark prices, known as West Texas Intermediate, and the global benchmark, Brent. Crude oil exports surged for a second straight week last week, to 2.4 million barrels a day, the EIA said.
A man fixes a sign with OPEC's logo next to the entrance of its headquarters before a meeting of oil ministers in Vienna. Photo: heinz-peter bader/Reuters
“We see another counter-seasonal draw to crude inventories as rising exports have countered a rebound in imports,” said Matt Smith, director of commodity research at ClipperData. “The gasoline draw is also supportive amid elevated refinery runs.”
While Wednesday’s report wasn’t across-the-board bullish—total stockpiles of oil and petroleum products fell by just 400,000 barrels—they said traders’ expectations for the report were particularly low because the American Petroleum Institute, an industry group, issued a bearish report Tuesday on oil inventories.
“Overall the report was barely bullish, but decidedly bullish compared to the API,” said Kyle Cooper, a consultant at ION Energy.
Though U.S. benchmark prices rose sharply Wednesday after the U.S. inventory report, Will Rhind, chief executive of GraniteShares, an exchange-traded fund issuer in New York, noted that prices for the global benchmark crude oil, Brent, only eked out minor gains.
“Brent crude oil prices ... were practically unchanged, perhaps in part reflecting Venezuela’s announcement that it plans to double oil production using a $5 billion loan from China,” Mr. Rhind said.
The increase in oil prices Wednesday adds to strong gains Tuesday that were partly due to by reports “suggesting Saudi Arabia may have moved towards at least temporarily accepting $80+ crude,” according to analysts at consultancy JBC Energy. “The market may have taken this as a sign that supplies may not go up much in response to further declines in Iranian crude exports,” the analysts wrote in a note Wednesday.
The Organization of the Petroleum Exporting Countries and its production allies, including Russia, are set to meet this weekend in Algiers to debate a further ramp up in production. The producers in late June agreed to begin boosting output by up to one million barrels a day after more than a year of holding back production.
“U.S. sanctions on Iran’s oil exports are just six weeks away and logic suggests the OPEC-plus alliance will ramp up output to alleviate the shortfall,” said Stephen Brennock, an analyst at brokerage PVM Oil Associates Ltd. “Yet with the Saudis at ease with higher oil prices and wary of riling the Iranians, the OPEC kingpin might favor maintaining the status quo,” he added.
Prices have been bolstered in recent weeks as buyers of Iranian crude have begun to significantly reduce imports ahead of U.S. sanctions taking effect at the start of November. Brent last week temporarily breached the $80 a barrel threshold for the first time since May—a level that until that point hadn’t been seen in more than 3½ years.
Among refined products, gasoline futures for October delivery rose 0.8% to $2.0207 a gallon. Diesel futures rose 0.5% to $2.2466 a gallon.