Oil Hits 2019 High on Biggest U.S. Crude Storage Drop Since July
(Bloomberg) -- Oil closed at a new high for the year in New York after the biggest withdrawal of crude in U.S. storage tanks since July signaled further tightening supplies.
Futures gained 1.4 percent on Wednesday after a 9.59 million-barrel decline in American oil stockpiles reported by the government exceeded analysts’ expectations. U.S. crude exports were near a record high while imports from Saudi Arabia decreased by more than half and Venezuelan crude imports to the U.S. stopped altogether. Domestic inventories of gasoline and diesel also shrank, indicating continuing strong demand.
“We’re not really going to be relying on increasing supply from Venezuela or Saudi Arabia,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. “We are continuing to see fairly robust demand, so even if U.S. production increases we will probably see seasonally stronger declines in inventory.”
Oil has gained 32 percent to start the year, supported by output cuts by OPEC and its partners, in addition to supply disruptions in Iran and Venezuela. Meanwhile, the Federal Reserve surprised traders with a more dovish outlook than anticipated after its meeting Wednesday, easing fears that slowing economic growth would dampen oil demand.
West Texas Intermediate crude for April delivery rose 80 cents to settle at $59.83 a barrel at the close of trading on the New York Mercantile Exchange. The April contract expired Wednesday; the more-active May futures climbed 94 cents to $60.23.
Brent for May delivery added 89 cents to $68.50 on the London-based ICE Futures Europe exchange. The global benchmark crude settled at a $8.27 premium to WTI for the same month.
Data released by the U.S. Energy Information Administration showed that U.S. crude exports rose to 3.39 million barrels a day in the week ended March 15, the second highest weekly rate on record since 1993.
“Exports continue to be pretty strong,” said Brian Kessens, portfolio manager and managing director at Tortoise in Leawood, Kansas. “There was some doubt about how much the U.S. could actually export from an infrastructure perspective and now that we’re consistently above 3 million barrels a day I think there’s a lot of confidence that that number can be sustained.”
Meanwhile, Federal Reserve officials scaled back their projected interest-rate increases this year to zero. Chairman Jerome Powell said it was a “great time” for the Fed to “be patient and watching, and waiting and seeing,” giving confidence that oil demand would remain robust.
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