West Texas Intermediate crude rose to a five-week high after a government report showed that U.S. refineries boosted operating rates, bolstering oil demand.
Futures advanced 0.2 percent after the Energy Information Administration said refineries operated at 85.7 percent of capacity in the seven days ended March 22, up 2.2 percentage points from the prior week and the most in two months. Crude supplies gained 3.26 million barrels to 385.9 million, the highest level in nine months. Stockpiles of distillate fuel, a category that includes heating oil and diesel, fell 4.51 million barrels to 115.3 million.
“The report was a net positive for the crude market even with the big build in supply,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “The strong uptick in refinery activity signals greater demand for crude in the weeks ahead. The distillate supply drop was very large and raised concerns about how tight stocks are.”
Crude oil for May delivery rose 24 cents to $96.58 a barrel on the New York Mercantile Exchange, the highest settlement since Feb. 19. The volume of all futures traded was 11 percent below the 100-day average for the time of day at 3:47 p.m.
Brent oil for May settlement gained 33 cents, or 0.3 percent, to end the session at $109.69 a barrel on the London-based ICE Futures Europe exchange. The volume of all futures traded was 21 percent above the 100-day average. The European benchmark was at a $13.11 premium to WTI, based on settlement prices, after reaching $13.02 yesterday, the narrowest spread since July.
Refinery runs, or the intake of crude for processing, climbed 364,000 barrels a day to 14.9 million, the highest level since the week ended Jan. 11, the EIA report showed. Units are often reopened in the spring after being idled for maintenance in late winter as attention shifts away from heating oil and before the peak season for gasoline consumption.
The drop in distillate stockpiles left supplies at the lowest level since November, according to the EIA. Gasoline supplies fell by 1.6 million barrels to 221.2 million last week.
Heating oil for April delivery surged 3.41 cents, or 1.2 percent, to settle at $2.9154 a gallon in New York. Volume was 7.2 percent above the 100-day average.
Gasoline for April delivery rose 0.49 cent to settle at $3.1155 a gallon on the Nymex. Volume was 19 percent above the 100-day average.
Total fuel consumption rose 0.3 percent to 18.4 million barrels a day in the four weeks ended March 22, the EIA report showed. Demand for distillate fuel climbed 5 percent over the period to 3.75 million barrels a day. It was the biggest distillate use increase since September.
Crude futures in New York tumbled as much as 0.8 percent in intraday trading. The gain in crude supply left inventories at the highest level since the week ended June 22. Imports rose 11 percent to 8.16 million, the most since the week ended Jan. 4.
“We got some mixed signals in the report,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The 3.3 million-barrel build in crude supplies triggered a selloff in crude, while the 4.5 million-barrel drop in distillate is putting upward pressure on heating oil. The market’s trying to make sense of it all.”
Oil output advanced 1,000 barrels a day to 7.15 million, near the 20-year high of 7.16 million reached in the week ended March 8. Production has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in states including North Dakota, Texas and Oklahoma.
‘Plenty of Supply’
“There’s plenty of supply here,” said Chip Hodge, who oversees a $9 billion natural-resource bond portfolio as senior managing director at Manulife Asset Management in Boston. “The positive changes in the U.S. crude-oil production picture are mind-boggling.”
Crude stockpiles at the U.S. storage hub in Cushing, Oklahoma, rose 439,000 barrels to 49.5 million last week, according to the EIA, the statistical arm of the Energy Department. Supplies there reached a record 51.9 million in the week ended Jan. 11.
Implied volatility for at-the-money WTI crude options expiring in May was at 15.9 percent, a decrease from 16.4 percent yesterday. The figures have slipped from 24.7 percent on Feb. 21.
Electronic trading volume on the Nymex was 418,834 contracts as of 3:47 p.m. It totaled 556,397 contracts yesterday, 0.3 percent above the three-month average. Open interest was 1.69 million contracts.