Oil surged to an eight-week high after the government said U.S. stockpiles shrank to levels last seen at the start of the year.
Futures rose 1.8 percent in New York. Crude inventories declined by 7.21 million barrels last week to the lowest since Jan. 6, according to data from the Energy Information Administration Wednesday. Gasoline stockpiles fell for a sixth week to the lowest level since December, the data showed.
“The primary driver behind the rally is that you’ve got more inventory draws,” said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, which oversees $142 billion of assets. “The market has essentially been hoping and hoping for inventory draws, so that’s a good thing.”
Oil has been on a rebound since hitting its low point for the year in June as rising demand for gasoline during the summer driving season is helping push stockpiles lower. But, prices have been stuck below $50 a barrel in New York since May amid lingering concerns that rising global output from producers such as Libya, Nigeria and the U.S. will offset reduced flows from members of the Organization of Petroleum Exporting Countries and its allies.
The United Arab Emirates reiterated its commitment to OPEC production cuts and said it would deepen its own curbs, and Kuwait also has promised to pump less. The move follows criticism on Monday from Saudi Energy Minister Khalid Al-Falih of OPEC members who haven’t fulfilled their pledged supply reductions.
West Texas Intermediate for September delivery rose 86 cents to settle at $48.75 a barrel on the New York Mercantile Exchange, the highest since May 30. Total volume traded was about 31 percent above the 100-day average.
Brent for September settlement added 77 cents to end the session at $50.97 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $2.22 to WTI.
U.S. crude supplies slipped to 483.4 million barrels last week, while gasoline stockpiles fell by 1.02 million barrels to 230.2 million barrels, the EIA data showed. Stockpiles at Cushing, Oklahoma, the delivery point for WTI and the biggest U.S. oil-storage hub, fell by 1.7 million barrels to 55.8 million, the lowest level since November 2015.
Crude production declined for the first time since June, slipping by 19,000 barrels a day, the data showed. While production from Alaska fell, output from the lower-48 states jumped for a fourth week.
“We’ve seen four weeks of constructive inventory reports and crude grind higher” Nick Holmes, an analyst at Tortoise Capital Advisors LLC in Leawood, Kansas, which manages $16 billion in energy-related assets, said by telephone. Still, worries remain regarding “OPEC compliance throughout the remainder of the year with the cut, how will OPEC phase out of the cut and what will U.S. production growth be in 2018.”
An exploration team working for the Nigerian National Petroleum Corp. was ambushed by suspected Boko Haram militants, and at least 10 people are missing, an official said. U.S. crude imports from OPEC’s Saudi Arabia, Venezuela, Iraq, Ecuador, Nigeria, Kuwait and Angola rose to 3.2 million barrels a day last week, up 22 percent from the week prior, according to preliminary EIA data for the week ended July 21.