Oil Jumps as Surprise U.S. Supply Drop Dispels Shale Boom Fears

Updated on
  • Nationwide crude inventories fell by most in five weeks: EIA
  • Cushing storage at lowest since 2014 as crude exports surge

IEA's Birol Sees Slowing Oil Demand Growth, No Peak

Oil surged to the highest in two weeks as American supplies unexpectedly shrank and exports surged, dispelling fears that a new shale boom will leave the country awash in crude.

Futures advanced 1.8 percent in New York after a government report showed U.S. crude stockpiles slid 1.62 million barrels last week, the largest draw in five weeks. That contrasted with a 2.9 million increase estimated in a Bloomberg survey ahead of the release.

At the same time, crude moving from storage facilities in Cushing, Oklahoma, to tankers on the Gulf Coast helped exports jump 55 percent to 2 million barrels a day, the most since October.

“The inventory numbers were better than expected,” Craig Bethune, a senior portfolio manager at Manulife Asset Management, said by telephone. “The market’s been concerned about U.S. production ramping, so as long as you still have these healthy inventory reports, it helps ease some of the fears.”

Meanwhile, output cuts from the Organization of Petroleum Exporting Countries are helping drain a global glut. Shipments from the group will fall by 300,000 barrels a day in the four weeks to March 10, according to tanker-tracker Oil Movements. The worry is oil undersupply, not oversupply, United Arab Emirates Energy Minister Suhail Al Mazrouei said at the International Petroleum Week conference in London.

West Texas Intermediate for April delivery rose $1.09 to settle at $62.77 a barrel on the New York Mercantile Exchange. Total volume traded was about 6 percent below the 100-day average.

Easing Fears

Brent for April settlement climbed by 97 cents to end the session at $66.39 a barrel on the London-based ICE Futures Europe exchange. The global benchmark traded at a $3.62 premium to WTI for the same month.

The Energy Information Administration report on Thursday also showed that crude production ticked lower for the first time since early January, while supplies at the nation’s biggest hub of pipelines and storage tanks in Cushing fell for a ninth straight week to the lowest level since 2014.

“It’s a constructive report,” said Nick Holmes, an analyst at Tortoise Capital Advisors LLC in Leawood, Kansas, which manages $16 billion in energy-related assets. Declining storage in Cushing boosted prices, and “we will continue to see that as crude is directed to the Gulf Coast” for export, he said.

Oil-market news:

  • Gasoline futures rose 0.5 percent to settle at $1.7657 a gallon. Gasoline inventories rose for a third week, while distillate supplies declined, EIA said.
  • Occidental Petroleum Corp.’sVicki Hollub, unfazed by oil titans expanding aggressively into the Permian, is vowing to keep leading the pack in America’s most prolific oil field.
  • Giant drilling developments called cubes in the Permian offer a glimpse into a supersized future for shale.
  • Chesapeake Energy Corp. shares jumped after the shale explorer’s fourth-quarter results exceeded expectations and the company pledged to slash spending this year.
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