Oil rose more than 3 percent on Wednesday to hit a six-month high over $62 a barrel as government data showed a steep drop in U.S. crude and gasoline inventories ahead of the summer driving season.
U.S. crude CLc1 rose $1.94 to settle at $62.04 a barrel, before trading up to a six-month high of $62.26 in post-settlement activity. London Brent LCOc1 traded up $1.67 to $60.59 a barrel.
U.S. crude oil and gasoline stockpiles fell sharply last week, according to a U.S. Energy Information Administration report, with crude down 2.1 million barrels and gasoline off 4.3 million barrels. [ID:nN20506528]
“Week over week, the report is very bullish,” said Phil Flynn of Alaron trading in Chicago.
“There are still questions over the economy, whether these prices can be sustained, which is why we will probably return to the stock market to see if there are any signs of economic help.”
Stock market strength has supported crude prices in recent months, helping lift them from lows below $34 a barrel on optimism any rebound in the economy could spur fuel demand.
U.S. stocks pared gains after the Federal Reserve cut its 2009 forecast for gross domestic product and raised its unemployment rate outlook. [.N]
Support also came as the dollar fell to its lowest level in nearly five months, boosting commodities denominated in the currency. [ID:nN20525273]
The Reuters-Jefferies CRB index .CRB, a global commodities benchmark, hit six-month highs as raw materials markets rallied amid equities gains and a weaker dollar. [ID:nNYR000025]
Fire struck gasoline-making units at two U.S. refineries this week, triggering a spike of roughly 8 percent in U.S. gasoline futures on Tuesday as the United States gears up for the traditional start of summer driving season, the Memorial Day holiday on Monday. [ID:nN19450038]
Data from Japan showed gasoline inventories at their lowest level since September 2007 and kerosene stocks declining to a near three-year low in part due to strong sales. [ID:nT309678]
Further strength has come from unrest in OPEC member Nigeria, Africa’s top oil and gas exporter. Shooting broke out in the Nigerian oil port city of Warri on Wednesday following days of military helicopter and gunboat raids on militant camps in the surrounding creeks. [ID:nLK90087]
Top Italian oil and gas company ENI SpA (ENI.MI) declared force majeure for its Brass River export terminal in Nigeria, adding its output affected so far was 9,000 barrels per day. [ID:nMAT009592]
The Algerian oil minister said the Organization of the Petroleum Exporting Countries (OPEC), which has agreed to cut 4.2 million bpd of output since September to prop up prices, has no reason to cut output again when it next meets on May 28. [ID:nN19444979]
The International Energy Agency said the economic downturn is cutting investment in energy supply, raising the risk of higher prices in future that could hamper any recovery. [ID:nLK977002]