Oil Surges the Most in Two Weeks After U.S. Inventories Decline

Oil Rises for Second Day: What's Next?
  • EIA reports 2.1 million-barrel drop in crude stockpiles
  • Venezuelan proposals for oil-producers summit `advancing'

Oil rose the most this month after a government report showed U.S. crude inventories declined as refineries bolstered operating rates.

Stockpiles slipped 2.1 million barrels last week, according to the Energy Information Administration. Refineries increased operating rates for the first time since July, and supplies of gasoline and distillate fuels surged. Stocks of oil exploration and production companies rallied, while those of refiners fell.

Oil has fluctuated since slumping below $40 a barrel last month as concern that China’s growth was slowing fueled volatility in markets. OPEC-member Venezuela’s proposals for an oil-producers summit are advancing, Foreign Minister Delcy Rodriguez said after talks with Saudi Arabian officials.

“The major reason for the inventory decline is that refiners ramped up production,” Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments, said by phone. “They probably wanted to take advantage of the lower crude price.”

Surging Volume

West Texas Intermediate for October delivery rose $2.56, or 5.7 percent, to settle at $47.15 a barrel on the New York Mercantile Exchange. It was the highest close and biggest one-day gain since Aug. 31. Volume was 42 percent above the 100-day average at 2:55 p.m.

Brent for November settlement climbed $2, or 4.2 percent, to end the session at $49.75 a barrel on the London-based ICE Futures Europe exchange.

E&P stocks in the Standard & Poor’s 500 index rose, led by a 6.1 percent gain for Apache Corp. as of 3:25 p.m. in New York. Marathon Petroleum Corp. led losses among refiners, with a 1.9 percent decline.

The stockpile gain left nationwide crude inventories at 455.9 million in the week ended Sept. 11, the EIA said. Supplies at Cushing, Oklahoma, the delivery point for WTI contracts and the nation’s biggest oil-storage hub, declined by 1.91 million barrels to 54.5 million, the lowest level since March.

U.S. crude output slipped 18,000 barrels a day to 9.12 million last week, the lowest since November, the EIA said. Crude imports dropped 270,000 barrels a day to 7.19 million, the least since July.

"Crude imports were down a second week, which is positive for the market," James Mick, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $15.6 billion, said by phone. "We need to see imports drop off to work off these inventories."

Refinery Upswing

Refineries increased operating rates by the most since April, the report showed. U.S. refiners typically slow during September to perform maintenance after the end of the summer peak driving season.

"The rise in refinery activity is counterintuitive for the time of year," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. "The product build was probably due to the crash in demand after Labor Day."

Gasoline supplies climbed 2.84 million barrels to 217.4 million, the highest level in two months. Implied demand for the fuel dropped 0.4 percent to 8.98 million barrels a day, the least since May.

Inventories of distillate fuel, a category that includes diesel and heating oil, increased 3.01 million barrels to 154 million, rising a 17th week, which is the longest stretch of advances since 1988.

"There’s always a concern that you’ll move the glut from crude to the products," Mick said. "That doesn’t seem to happened yet, but I’m concerned about distillate."

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