US oil prices up 5% on surprise drop in crude stocks
US oil prices rose 5.18 percent owing to a surprise draw in domestic crude stockpiles. US crude stocks declined by 4.9 million barrels last week as imported eased. US refineries have been raising their output, as stated by Energy Information Administration (EIA). The marginal drop in US dollar is also making dollar-denominated imports cheaper.
US crude futures were up $1.85 or 5.18 percent at $37.75 per barrel. International Brent futures gained $1.91 to $39.76 a barrel. Analysts predicted inventories to reach record high for eight weeks in a row with a build of 3.2 million barrels.
CNBC reports that US crude futures received additional support from the restart of TransCanada Corp's pipeline which became operational with a delay. Keystone pipeline has a capacity of 590,000 barrels per day and delivers crude to Cushing and Illinois. The US government has reported surge in gasoline stocks for the first time in six weeks.
Despite the rise in crude futures, some traders hold cautious note that physical supply and demand fundamentals didn't warrant the strong price recovery at present. International Brent futures rose over $40 per barrel and were trading at $40.10 per barrel. This is up 26 cents from Tuesday's closing. US West Texas Intermediate (WTI) crude futures were hovering at $38.09 a barrel up 34 cents and eight cents above April low level.
Reuters sees the reason for surge in oil prices as the unexpected drop in US crude inventories. At a time, when imports are easing, US refineries have decided to ramp up production levels. ANZ Bank said that oil prices spiked after the EIA data release. US crude stockpiles eased 4.9 million barrels in the week which ended 1st of April as against the analysts' forecast of rise in output by 3.2 million barrels.
Recovery in the manufacturing sector is also boosting demand. Macquarie bank said "Global manufacturing PMIs (Purchasing Managers' Index) saw their strongest MoM (month-on-month) recovery in two and half years in March, according to our calculations."
New York Mercantile Exchange recorded light and sweet crude futures for May delivery, which advanced to 5.2 percent or $1.86 to $37.75 a barrel. This was a major rise since 16th of March. June Brent crude on London ICE Futures Exchange gained $1.97 or 5.2 percent to close at $39.84 a barrel. Oil futures reached support after the data from American Petroleum Institute showed a 4.1 million barrels drop in stockpiles. This decline was considered to be a major drop since 1997, as reported by MarketWatch.
Meanwhile, the North Sea oil field in Europe is scheduled for maintenance in May, supporting Brent futures as these are prices off supplies from this region. The drop in US dollar over five percent is also supporting oil price while the weakening US dollar makes dollar-denominated oil imports cheaper for countries using other currencies.