By Liz Moyer
Investing.com – Oil prices rose for a third day in a row on Wednesday as the U.S. government reported a second straight weekly drawdown in crude stockpiles against market analysts’ consensus for an inventory build.
Gasoline stockpiles, however, rose for a fourth time in five weeks.
The broad two-month long rally in oil prices has convinced physical crude traders to cash in more of the barrels in their hold, rather than store them, despite a slack in demand for fuel products caused by sluggish traffic recovery from the coronavirus pandemic.
New York-traded West Texas Intermediate, the key indicator for U.S. crude, climbed 93 cents, or 1.7%, to settle at $55.69 per barrel. WTI has risen about 6% since Friday’s settlement of $52.50.
London-traded Brent, the global benchmark for crude, settled up $1, or 1.7%, at $58.46. Brent has actually risen four days in a row, gaining about 5% since Thursday’s settlement of $55.53.
Wednesday’s rally came after the Energy Information Administration reported that U.S. Crude inventories fell 994,000 barrels last week, compared with analysts’ consensus for a build of 446,000 barrels.
Investing.com analyst Barani Krishnan said the missed consensus was due to “the push-and-pull between imports and exports”. Aside from analysts, oil bulls also probably fell short of their expectations for a large draw after the American Petroleum Institute’s call on Tuesday for a deficit of some 4.3 million barrels, said Krishnan.
Going by EIA’s data breakdown, crude imports actually rose 1.4 million barrels per day, suggesting an inflow of 9.8 million barrels. But that was partially offset by a 720,000 bpd rise in exports that took off some 5.04 million barrels.
“U.S. crude exports have been truly remarkable for a while, with China stocking up on all they can buy in anticipation of their rebound this year, regardless what happens in the broader world,” said Krishnan.
Distillate stockpiles, which include diesel and heating oil, declined by 9,000 barrels in the week against expectations for a draw of 429,000 barrels, the EIA data showed. Heating oil consumption is expected to spike further this week due to a major snow storm in the U.S. Northeast, suggesting distillate draws could be higher in the EIA’s next dataset.
But gasoline inventories rose 4.466 million barrels last week, compared with expectations for a 1.134 million-barrel build.
“Due to the price gains in crude, it’s just become more cost-advantageous to turn oil into products now than store it as crude,” said Krishnan. “That explains the gasoline build in the past four out of five weeks. You now have a net build of 15.6 million barrels of gasoline over the past five weeks and all these, ultimately, will have to find consumers. The Biden administration’s economic recovery programs, along with Covid-19 vaccination progress will determine how gasoline consumption shapes in the coming days, weeks and months.”