Oil Hits 2019 High on Biggest U.S. Crude Storage Drop Since July

Crude has surged nearly 30 percent this year on Saudi-led output cuts by the OPEC+ coalition.

Ben Foldy

24 Apr 2019, 10:32 PM IST

Oil Hits 2019 High on Biggest U.S. Crude Storage Drop Since July

Petrol and diesel prices have been hiked for 15 days in a row, despite a decline in the rates of crude oil.

(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.

Other oil-market news:
Gasoline futures gained 1.2 percent to settle at $1.9166 Firefighting crews early Wednesday extinguished a petrochemical tank fire near Houston that had blazed for almost four days. The reshaping of the oil industry over the past five years -- driven by the shale boom and the deep price slump -- has put the major international companies back on top, says Goldman Sachs Group Inc.

--With assistance from Nancy Moran.

To contact the reporter on this story: Ben Foldy in New York at bfoldy@bloomberg.net

To contact the editors responsible for this story: Pratish Narayanan at pnarayanan9@bloomberg.net, Christine Buurma, Joe Carroll