By Barani Krishnan
Investing.com – Another week in U.S. oil data and another hurrah for OPEC.
U.S. crude futures hit 2019 highs on Wednesday after weekly data showed crude inventories in the United States fast depleting from relentless cuts in Saudi exports, as well as tighter availability all round in oil provided by other members of OPEC.
U.S. West Texas Intermediate crude settled up $1.39, or 2.4%, at $58.26 per barrel, after hitting $58.48 earlier, its highest level for the year. It was also WTI’s biggest one-day gain since Feb. 27, putting the U.S. crude benchmark on track for a weekly rise of 4%.
U.K. Brent, the global oil benchmark, was up $1.02, or 1.5%, at $67.69 by 3:22 PM ET (19:22 GMT). It was on course for a gain of 2.6% on the week.
Wednesday’s rally came as the U.S. Energy Information Administration reported that crude oil inventories fell by 3.86 million barrels in the week to March 8 versus forecasts for a stockpile build of 2.66 million. In the previous week, inventories surged by 7.07 million barrels.
Stockpiles of gasoline, the main product processed out of crude, also saw a surprising plunge as refineries drew down stockpiles on hand, given the squeeze on imports. Inventories of distillates, which include diesel, however, showed an unexpected rise.
“Stymied net imports and refinery runs clambering above the 16-million-barrel-per-day mark has been enough to yield a second draw to crude inventories in three weeks,” Matt Smith, analyst at New York-based crude cargo surveyor Clipperdata, said in an email to Investing.com.
Gasoline inventories fell by 4.62 million barrels, compared to expectations for a draw of 2.53 million barrels, the EIA said. Distillate stockpiles increased by 0.38 million barrels, compared to forecasts for a decline of 1.86 million.
Oil was already rallying prior to the EIA report on remarks by U.S. special envoy Elliott Abrams that Washington planned “very significant” further sanctions on Venezuelan oil that could add to the scramble by U.S. refiners for such heavier-grade crudes typically sourced from the Middle East and South America. Venezuela was into a six-day blackout as of Wednesday, its worst on record, that had left exports from its main oil terminal at a standstill.
Crude bulls were also helped by a separate EIA announcement that it expected U.S. crude production to grow more slowly in 2019 than previously forecast, averaging about 12.3 million barrels per day. For 2020, production estimates were revised down from 13.2 million bpd to 13.03 million. Output for last week was adjusted lower by 100,000 bpd, Wednesday’s data showed.
Saudi Energy Minister Khalid al-Falih said this week that production cuts by the OPEC+ alliance, which includes Russia, would likely continue until June, at least, after another outsized reduction was indicated for the Kingdom for its own exports in April.
Beyond Wednesday’s U.S. inventory data, investors await the publication of monthly oil market reports from both OPEC and the International Energy Agency on Thursday and Friday, respectively, as they seek to gauge the outlook for global supply and demand.