Oil futures reclaimed the $50 level on Wednesday, taking their cue from a rally in heating oil and gasoline despite a U.S. government report showing that crude supplies rose for a seventh straight week. Weakness in the U.S. dollar following Federal Reserve Chairwoman Janet Yellen’s testimony to the House Financial Services Committee Wednesday also provided support for dollar-denominated oil prices.
On the New York Mercantile Exchange, crude futures for delivery in April settled at $50.99 a barrel, up $1.71, or 3.5%. The April contract had posted declines in each of the last five trading sessions. Brent crude for April delivery on London’s ICE Futures exchange closed up $2.97, or 5.1%, to $61.63 a barrel. “Crude-oil inventory data has clearly shown that the market is still oversupplied, especially when you look at the demand side,” said Naeem Aslam, chief market analyst at AvaTrade. However, “further negative news is not bringing any further substantial downside move for crude,” and that is likely one of the reasons why traders may think the oil market has formed a price bottom, he said.
Early Wednesday, the U.S. Energy Department said crude inventories rose by 8.4 million barrels for the week ended Feb. 20. Analysts polled by Platts forecast a crude-stock climb of 3.7 million barrels, while the API had reported an 8.9 million-barrel rise. “With crude-oil inventories at the highest level for this time of year in the last eight decades, our focus is starting to shift towards Cushing, Okla. and its capacity,” said John Macaluso, research analyst at Tyche Capital Advisors, referring to the U.S. oil storage hub. He said “uninterrupted maintenance and strikes [at] refineries should continue to give a bid to [petroleum] products and propel an already fattening global [crude] supply surplus.”
Gasoline supplies fell by 3.1 million barrels, while distillate stockpiles declined by 2.7 million barrels, according to the EIA. Analysts surveyed by Platts expected a decline of 1 million barrels for gasoline and a fall of 2.8 million barrels for distillate inventories. The cold winter in the eastern U.S. has boosted demand for heating oil. Over the past four weeks, the amount of distillate fuel product supplied, which includes heating oil, averaged more than 4.1 million barrels a day — up 11.2% from the same time last year, the EIA report said.