Oil Climbs Most in Six Weeks After Record U.S. Refinery Runs

  • Refiners processed record 17.1 million barrel a day of crude
  • U.S. crude supplies rose 4.1 million barrels last week: EIA

Oil increased the most in almost six weeks after a government report showed U.S. refiners processed a record amount of crude last week.

Refineries nationwide used 17.1 million barrels a day of crude last week, according to the Energy Information Administration, the most in weekly data going back to 1989. Refineries operated at the highest utilization rate since September before they perform planned seasonal maintenance. Oil stockpiles rose 4.1 million barrels, more than the 1.5 million barrel increase forecast by analysts surveyed by Bloomberg.

"Refineries are cranking out production to build fuel stockpiles before they go into maintenance," said Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments. "Seasonally, it’s not that unusual to see big inventory builds."

Prices have rallied since the Organization of Petroleum Exporting Countries and 11 other nations agreed to curb output to trim a global supply glut. Futures advanced earlier Wednesday as Saudi Arabia was said to reduce February crude sales to China and southern Asian nations as it curbs supply in accordance with the deal.

West Texas Intermediate crude for February delivery rose $1.43, or 2.8 percent, to $52.25 a barrel on the New York Mercantile Exchange. It was the biggest increase since Dec. 1. Total volume traded was about 46 percent above the 100-day average at 2:55 p.m.

Brent for March settlement rose $1.46, or 2.7 percent, to $55.10 a barrel on the London-based ICE Futures Europe exchange. The global benchmark closed at a $2.04 premium to March WTI.

Seeking Evidence

Coming into the year, traders were skeptical of production cuts from OPEC, non-OPEC countries, said Chris Kettenmann, chief energy strategist at Macro Risk Advisors LLC in New York. The EIA data "increases pressure on the cartel for near-term production cuts if they are serious about contra-seasonal inventory draws. We continue to look for evidence in the back half of January."

The crude supply gain left U.S. stockpiles at 483.1 million barrels, the highest seasonal level in more than three decades, according to weekly data compiled by the EIA since 1982. Inventories at Cushing, Oklahoma, the delivery point for WTI and the nation’s biggest oil-storage hub, fell by 579,000 barrels last week.

"The headlines were bearish, but when you look deeper some bullish themes appear," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "The rise in refinery runs portends strong demand for crude for the next several weeks. They will have to hold up to support this rally."

Gasoline stockpiles rose 5.02 million barrels to 240.7 million, the highest since July. Inventories of distillate fuel, a category that includes diesel and heating oil, jumped 8.36 million to 170 million, the highest since 2010.

Oil-market news:

  • Russian oil output fell to 11.026 million barrels a day on Jan. 10, down from 11.114 million during the month’s first eight days, Energy Ministry data show.
  • The EIA increased its U.S. output forecast for 2017 to 9 million barrels a day from 8.78 million projected in December, according to its monthly Short-Term Energy Outlook.
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