Oil futures moved higher Wednesday, supported by an eight million-barrel weekly drop in U.S. crude supplies — the largest weekly decline in roughly a year — on the two-year anniversary of the day U.S. benchmark crude futures settled at a negative price for the first time on record.
West Texas Intermediate crude for May delivery
rose $1.07, or 0.9%, to $103.47 a barrel on the New York Mercantile Exchange ahead of the contract’s expiration at the end of the session. The most actively traded June contract
was up $1.02, or 1%, at $103.07 a barrel.
Oil prices got a boost after the Energy Information Administration reported on Wednesday that U.S. crude inventories fell by 8 million barrels for the week ended April 15. That was the largest weekly decline since at least the week ended April 30, 2021, when the EIA also reported supplies fell by 8 million barrels.
The EIA was expected to show crude inventories up by 2.2 million barrels, according to Marshall Steeves, energy markets analyst at S&P Global Commodity Insights. The American Petroleum Institute on Tuesday reported a 4.5 million-barrel decline, according to sources.
The drop in crude inventories reversed nearly all of last week’s 9.4 million-barrel build, despite a “whopper of a 4.7 million-barrel release” from the Strategic Petroleum Reserve and production ticking higher to 11.9 million barrels per day, said Matt Smith, lead oil analyst, Americas, at Kpler, in emailed commentary.
“Higher refining activity, low imports and strong exports have been the driver behind the large draw,” he said. “Strong exports have been driven by a pull to Europe and we should expect strength in the weeks ahead.”
The EIA reported weekly inventory declines of 800,000 barrels for gasoline and 2.7 million barrels for distillates. Steeves pegged forecasts at a 1.2 million-barrel decline for gasoline and 1 million-barrel fall for distillates.
The inventory numbers were “very surprising with large draws across the board,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. The supply declines, along with the potential for Europe to ban Russian oil, should lead prices to “grind higher and any weakness should be bought.”
The moves for oil come two years to the day when WTI crude futures settled at a negative $37.63 a barrel on Nymex. That’s when the market took a hit from a glut of supplies built up on the back of a price war between Saudi Arabia and Russia, a drop in demand due to the pandemic and a contract expiration.