Oil Rises After U.S. Crude Supplies Fall a Record Ninth Week

(Bloomberg) -- Oil rose after a government report showed that U.S. crude stockpiles fell a ninth week, marking the longest stretch of declines on record.

Crude inventories fell 2.34 million barrels last week, Energy Information Administration data show. Supplies remain at the highest seasonal level in at least a decade. Gasoline stockpiles rose as refineries bolstered operating rates to the highest level this year. Prior to the report, prices fell to a two-month low as the Bloomberg Dollar Spot Index climbed to a seven-week high.

"We are continuing to see crude being made into products," said Chip Hodge, who oversees a $12 billion natural-resource bond portfolio as senior managing director at John Hancock in Boston. "We have to slog through a great deal of excess supply before the market returns to balance."

Oil has dropped about 13 percent since touching a 10-month high of $51.67 a barrel on June 9 as Canadian supply returned after wildfires and the Brexit vote raised concerns about European economic strength. Falling U.S. crude production and inventories have offered support for the market, which saw prices hit a 12-year low in February.

West Texas Intermediate for August delivery, which expires Wednesday, rose 49 cents, or 1.1 percent, to $44.14 a barrel at 12:09 p.m. on the New York Mercantile Exchange. Prices earlier touched $43.69, the lowest intraday since May 10. The more-active September contract climbed 51 cents to $45.96.

Record Stretch

Brent for September settlement rose 66 cents, or 1.4 percent, to $47.32 on ICE Futures Europe. The global benchmark traded at a $1.36 premium to WTI for September delivery.

The EIA report showed U.S. crude supplies dropped a ninth week, which is the longest stretch of declines in the data series that the agency began gathering in 1982. Inventories dropped to 519.5 million barrels, the lowest since the week ended Feb. 26, EIA data show. Supplies climbed to an 87-year high of 543.4 million barrels in the last week of April.

"Crude is consolidating here and then should start moving higher," said Matt Sallee, who helps manage $14.1 billion in oil-related assets at Tortoise Capital Advisors in Leawood, Kansas. "The crude decline reaffirms our view. The market’s tightening."

Refineries bolstered operating rates by 0.9 percentage points to 93.2 percent of capacity, the highest since November. Refineries processed 17.1 million barrels of oil, the most since August. U.S. refiners typically boost utilization in June and July as they maximize gasoline output for the summer peak driving season.

Gasoline Stockpiles

Gasoline supplies rose 911,000 barrels to 241 million last week, marking the highest level since April, the report showed. U.S. consumption of the fuel averaged 9.73 million barrels a day in the four weeks ended July 15, down 0.1 percent from July 8 but still the highest seasonal level in at least a decade.

"The gasoline number is bearish," said Tim Evans, an energy analyst at Citi Futures Perspective in New York. "This is a time of year when gasoline supplies are normally being intentionally run down because refiners don’t want to end the summer driving season with full tanks."

Gasoline futures for August delivery slipped 0.3 percent to $1.3711 a gallon, after dropping to $1.3381 earlier, the lowest since March 7.

The Bloomberg Dollar Spot Index, which tracks the currency against major peers, increased as much as 0.25 percent, while the Bloomberg Commodity Index decreased as much as 1.1 percent. A stronger greenback reduces the appeal of dollar-denominated raw materials to investors.

Oil-market news:

• Goldman Sachs Group Inc. sees Russia oil output exceeding the former Soviet record set almost 30 years ago by the end of 2018, according to a research note after meetings with major oil companies and government officials.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net, Carlos Caminada, Anne Riley