NEW YORK: US oil futures sharply rebounded on Wednesday (Nov 5) from the prior day’s dive after the US petroleum inventories report showed a smaller-than-expected increase in crude oil supplies.
The US benchmark, West Texas Intermediate for December delivery, advanced US$1.49, or 1.9 per cent, to close at US$78.68 a barrel. Brent North Sea crude for delivery in December settled at US$82.95 a barrel in London, up a modest 13 cents from Tuesday’s closing level but still bouncing back from intraday losses.
The oil market revived after the US Department of Energy (DoE) reported that the nation’s crude inventories grew by 500,000 barrels in the week ending Oct 31.
That was much less than the 2.2 million barrel increase on average expected by analysts, according to a Dow Jones Newswires survey. Over the four previous weeks, crude inventories had climbed by roughly 23 million barrels.
Crude supplies at the closely watched Cushing, Oklahoma, terminal fell by 600,000 barrels, and gasoline stockpiles fell by 1.4 million barrels, widely topping forecasts of a drop of 300,000 barrels.
Andy Lipow, of Lipow Oil Advisors, said the DoE report was “on the bullish side” with inventory drawdowns and ramped-up refinery use.
The data showed refineries were operating at 88.4 per cent of their capacity, compared with 86.6 per cent the prior week, suggesting more demand for oil in the world’s largest crude consumer, Lipow said.
Media reports of a pipeline fire in OPEC kingpin Saudi Arabia on Wednesday helped support the oil market, Lipow said. The Saudi civil defence department later announced the pipeline was “accidentally damaged” by work in the area, and the fire was brought under control.
The oil market rebounded from Tuesday’s massive sell-off, which took WTI to its lowest close since October 2011 and Brent to its lowest since October 2010, after Saudi Arabia cut its prices for crude sold to the US market. Analysts interpreted the move as an effort to maintain market share in North America against cheaper oil flooding from US shale fields.
According to the DoE, US production hit a record 8.97 million barrels of oil per day last week.