West Texas Intermediate crude rose after a government report showed that U.S. inventories tumbled to the lowest level in almost 22 months as imports plunged.
Futures climbed 1.7 percent. The Energy Information Administration said crude supplies fell 7.66 million barrels to 350.2 million, the least since March 2012. Imports of crude slid 13 percent, the biggest decline since September 2012. Fuel demand climbed for the first time in four weeks. WTI also increased after manufacturing in the New York region expanded.
“The drop in imports appears to be the main reason for the big crude number,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The barrels that used to come here appear to have been diverted to other destinations. Demand has been pretty anemic, so there was no need for them.”
WTI for February delivery climbed $1.58 to $94.17 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 2. Today’s gain was the biggest since Dec. 3. The volume of all futures traded was 25 percent above the 100-day average at 3:50 p.m. The grade has lost 4.3 percent in 2014.
Brent for February settlement increased 74 cents, or 0.7 percent, to end the session at $107.13 a barrel on the ICE Futures Europe exchange. Futures slipped to $105.80 earlier today, the lowest level since Nov. 12. Volume was 9.8 percent above the 100-day average.
The European benchmark crude’s premium to WTI dropped to $12.96, the narrowest level since Jan. 3 based on settlement prices.
Crude supplies have tumbled 41.2 million barrels since Nov. 22, the largest seven-week decline in data going back to 1982. Stockpiles were forecast to drop 1.3 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg.
“This is a significant supply decline, and prices are reacting appropriately,” said John Kilduff, partner at Again Capital LLC a New York-based hedge fund that focuses on energy. “There was speculation that the drops would shrink in size with the beginning of the new year. We’re going to have to go back and review some of our assumptions about the market.”
The decline in imports was the biggest since September 2012, EIA data showed. Arrivals to Gulf Coast states, known as PADD 3, dropped 11 percent to 3.09 million barrels a day, the least since September 2008.
Inventories of crude at Cushing, Oklahoma, the delivery point for WTI traded in New York, rose 145,000 barrels to 40.9 million, the report showed.
U.S. crude production increased 14,000 barrels a day to 8.16 million, the most since 1988, according to the EIA, the Energy Department’s statistical arm. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations.
Gasoline stockpiles gained 6.18 million barrels to 233.1 million last week. Inventories were projected to climb by 2.5 million barrels, according to the Bloomberg survey.
“The gasoline data was bearish but not strong enough to balance the big decline in crude,” Kilduff said.
Supplies of distillate fuel, a category that includes heating oil and diesel, slid 1.02 million barrels to 124 million. A 1.25 million-barrel gain was forecast.
Total products supplied, a measure of fuel consumption, climbed 3.5 percent to 18.9 million barrels a day, the first increase in four weeks. Distillate fuel demand surged 23 percent to 3.72 million barrels a day.
Refineries operated at 90 percent of capacity, down 2.3 percentage points from the prior week, EIA data showed. Utilization surged to 92.7 percent on Dec. 20, the highest level since July.
“Utilization was down significantly,” said Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York. “The data should have an asterisk after it because the drop was probably related to the severe cold that caused some refiners to shut units. If not for the drop in refinery utilization, the crude drop would have been even larger.”
The Federal Reserve Bank of New York’s general economic index, which covers New York, northern New Jersey and southern Connecticut, rose to 12.5 in January, topping the 3.5 estimate in a Bloomberg survey. Readings greater than zero signal growth.
“The economic data this morning was positive, and that points to greater fuel demand,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago.
U.S. equities also rose on the economic data. The Standard & Poor’s 500 Index increased 0.6 percent, and the Dow Jones Industrial Average gained 0.7 percent.
The Washington-based World Bank sees the global economy expanding 3.2 percent this year, compared with a June projection of 3 percent and up from 2.4 percent in 2013. The forecast for the richest nations was raised to 2.2 percent from 2 percent, while the expectation for developing markets was cut to 5.3 percent from 5.6 percent.
Implied volatility for at-the-money WTI options expiring in March was 18.4 percent, down from 19.6 percent yesterday, data compiled by Bloomberg showed.
Electronic trading volume on the Nymex was 599,422 contracts at 3:51 p.m. It totaled 666,467 contracts yesterday, 27 percent higher than the three-month average. Open interest was 1.62 million contracts.