Oil prices rallied Wednesday, settling at their highest level in roughly three weeks after data from the Energy Information Administration showed a weekly rise in U.S. crude inventories that was below some market forecasts, along with bigger-than-expected declines in gasoline and distillate stockpiles.
Disruptions to crude output in Libya, as well as hopes for a six-month extension to the production cut agreement, led by the Organization of the Petroleum Exporting Countries, added further support to oil prices.
Combined, the upbeat factors “offered the market a touch of optimism that perhaps things are headed in the right direction for global balance,” said Jenna Delaney, senior oil analyst at Platts Analytics, a unit of S&P Global Platts.
May West Texas Intermediate crude CLK7, +0.71% rose $1.14, or 2.4%, to settle at $49.51 a barrel on the New York Mercantile Exchange. The contract settled at its highest level since March 9, according to FactSet data. May Brent LCOK7, +0.17% gained $1.09, or 2.1%, to $52.42 a barrel.
The EIA reported that crude inventories rose by 900,000 barrels to a weekly record 534 million barrels for the week ended March 24. But that rise was less than half the 1.9 million-barrel climb posted by the American Petroleum Institute late Tuesday.
Analysts polled by S&P Global Platts forecast a climb of 300,000 barrels, while others expected an even larger increase, with Citi Futures forecasting a 2 million- to 3 million-barrel rise.
“An extremely big jump in refinery activity on the Gulf Coast, a tick lower in imports and a rebound in exports has led to a lower-than expected-build to crude inventories,” said Matt Smith, director of commodity research at ClipperData. But that’s “an increase nonetheless—lifting oil inventories to a further new record.”
Still, Phil Flynn, senior market analyst at Price Futures Group, pointed out that supplies in the Strategic Petroleum Reserve fell by more than 700,000 barrels and “if you add that to commercial-oil inventories, the increase in supply looks smaller.”
The EIA also said gasoline supplies dropped 3.7 million barrels, while distillate stockpiles fell 2.5 million barrels last week. The Platts survey forecast a fall of 2.1 million for gasoline and decline of 1.1 million for distillates.
On Nymex, April gasoline RBJ7, +0.53% rose 3.7 cents, or 2.3%, to $1.672 a gallon, while heating oil for the same month HOJ7, +0.51% gained 2.6 cents, or 1.7%, to $1.543 a gallon.The feud between Iran and Saudi Arabia intensified at the start of last year, but the two nations have since made moves to bridge their longstanding divide.
Elsewhere in energy trading, natural gas for April US:NGJ17 ended at $3.175 per million British thermal units, up 7.9 cents, or 2.6%. The contract expired at the day’s settlement.
The EIA will issue its weekly update on U.S. natural-gas supplies Thursday, with an S&P Global Platts survey of analysts forecasting a decline of 43 billion cubic feet.