Oil Jumps After U.S. Crude Stockpiles Shrink Most Since August

(Bloomberg) -- Oil closed above $62 a barrel for the first time in more than three years after U.S. crude stockpiles shrank by the most since the summer driving season.

Futures jumped 0.6 percent in New York to the highest level since December 2014. American crude inventories slipped by 7.42 million barrels last week as refiners boosted operating rates to the highest level in more than a decade, signaling strong demand, the Energy Information Administration said on Thursday. Stored crude supplies have been dwindling for seven straight weeks and the scope of last week's withdrawal surprised analysts.

“The crude oil inventory number was pretty healthy relative to consensus,” Brian Kessens, who helps manage $16 billion in energy assets at Tortoise Capital Advisors LLC, said by telephone. “People are optimistic that there are some tailwinds behind the underlying crude oil price.”

Oil broke above $62 in New York as the U.S. supply picture appeared tighter, with crude inventories at Cushing, Oklahoma sliding below their five-year average. Prices have risen as the Organization of Petroleum Exporting Countries and Russia work to reduce global inventories through output reductions and amid concerns over the stability of the group's third-biggest producer, Iran.

Tensions in Iran have also sparked fear that there could be an impact on oil production in the region, according to Joseph Bozoyan, a portfolio manager at Manulife Asset Management LLC in Boston.

Tightening Supplies

West Texas Intermediate for February delivery rose 38 cents to settle at $62.01 a barrel on the New York Mercantile Exchange. The front-month futures' premium over second-month WTI is at the widest in more than three years.

Brent for March settlement advanced 23 cents to end the session $68.07 a barrel on the London-based ICE Futures Europe exchange, the highest since December 2014. The global benchmark crude traded at a premium of $6.17 to March WTI.

U.S. crude inventories fell to 424.5 million barrels last week, while distillate supplies climbed by about 8.9 million barrels, the most since December 2016, the EIA said. U.S. refiners boosted operating rates for a third straight week, contributing to the decline in stored oil supplies. Stockpiles at the nation's key pipeline hub in Cushing dropped to about 49 million barrels.

“Investors have a positive sentiment about the market at this point in time. You're seeing a little bit more of a bullish push-up in the price of oil,” Mark Watkins, a Park City, Utah-based regional investment manager at U.S. Bank Wealth Management, which oversees $142 billion in assets, said by telephone. “You've got supply coming into balance and the demand factor is definitely picking up around the globe.”

Oil-market news:

• OPEC shipments will fall to 25.48 million barrels a day in the four weeks to Jan. 20 versus the period to Dec. 23, according to tanker-tracker Oil Movements.
• Saudi Arabia cut February pricing for most of its crudes sold to U.S. buyers for a second month as the world's largest oil exporter ships record-low volumes to American ports in its effort to trim a global glut.
• Analysts and traders are bullish on WTI crude futures, according to a Bloomberg survey.
• The Trump administration is proposing to make more than 90 percent of the U.S. outer continental shelf available for oil leasing, Interior Secretary Ryan Zinke told reporters.

To contact the reporter on this story: Jessica Summers in New York at jsummers24@bloomberg.net.

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Mike Jeffers, Catherine Traywick

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