Gasoline Pulls Oil Higher as Traders Shrug Off Crude Supply Gain

  • Crude stockpiles climbed 13.8 million barrels last week: EIA
  • Gasoline supplies fell 869,000 barrels as refineries slowed

Oil Declines on Projected U.S. Crude Stockpiles

Oil was pulled higher by a surge in gasoline after U.S. motor fuel supplies unexpectedly fell last week, shrugging off the biggest crude supply gain since October.

Gasoline stockpiles fell 869,000 barrels, pushing refining margins more than $2 a barrel higher. Demand climbed the most in a year. Crude inventories climbed 13.8 million barrels in the week ended Feb. 3 as imports increased, the Energy Information Administration said. That was in line with the industry-funded American Petroleum Institute, which reported Tuesday a 14.2 million-barrel increase

"There’s been a lot of concern about plunging gasoline demand and with this report it’s returned to normal levels," John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by telephone. "Healthy gasoline demand eventually translates into higher refinery runs and increasing crude demand."

Oil has fluctuated above $50 a barrel since a deal to trim output between the Organization of Petroleum Exporting Countries and 11 other nations took effect on Jan. 1. While OPEC members implement pledged cuts and Russia says its own reductions are ahead of schedule, U.S. production has edged higher as drillers targeting crude boosted the rig count to the most since October 2015.

West Texas Intermediate for March delivery rose 17 cents to settle at $52.34 a barrel on the New York Mercantile Exchange. Total volume traded was about 40 percent above the 100-day average. March gasoline jumped 4.4 percent to $1.5527 a gallon, pushing the March crack spread up $2.56 to $12.87 a barrel, the highest in two weeks.

Brent for April settlement advanced 7 cents to $55.12 on the London-based ICE Futures Europe exchange. The global benchmark crude closed at a $2.21 premium to April WTI.

See also: U.S. oil output heads to 48-year high as shale drilling resumes

U.S. crude supplies rose to 508.6 million last week, the highest since May, according to the EIA. Stockpiles at Cushing, Oklahoma, the biggest U.S. storage hub and the delivery point for WTI, climbed 1.14 million barrels.

OPEC Surge

"We were probably seeing the last surge of OPEC output and now inventories will start decline, at least they better for the bulls’ sake," Kyle Cooper, director of research with IAF Advisors in Houston, said by telephone.

Crude imports surged to 9.37 million barrels a day, the highest since September 2012. Domestic production rose to 8.98 million barrels a day, the highest since April.

"We’re still seeing the impact of elevated production from OPEC ahead of the cuts," Craig Bethune, a fund manager at Manulife Asset Management Ltd. in Toronto who focuses on energy and natural resources investments, said by telephone. "We should start to see imports decline in the next few weeks."

U.S. gasoline supplied jumped 7.6 percent to the highest level this year, after slumping to a two-year low in the week ended Jan. 20.

Oil-market news:

  • Parsley Energy Inc. plunged the most since September 2015 after announcing plans to issue new shares to raise cash for its $2.8 billion purchase of drilling rights in the biggest U.S. oil field.
  • Saudi Arabian Oil Co. hired Moelis & Co. to advise on its initial public offering, according to a person familiar with the matter, as it moves forward with plans for the world’s biggest share sale.
  • Most OPEC members would be happy with an oil price of $60 a barrel, Iranian Oil Minister Bijan Namdar Zanganeh said after a meeting with his Venezuelan counterpart in Tehran, according to Tasnim news agency.
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