U.S. oil futures finished higher on Wednesday, despite a spike in U.S. weekly crude supplies, as a move by Saudi Arabia and comments from its oil minister implied strength in demand for oil.
Crude for delivery in April climbed $1.01, or 2%, to settle at $51.53 a barrel on the New York Mercantile Exchange. Prices had dropped below $50 after a government report showed that weekly crude supplies jumped by more than 10 million barrels. April Brent crude on London’s ICE Futures exchange settled lower, but off the session’s lows, at $60.55 a barrel, down 47 cents, or 0.8%. Saudi Arabia said it increased its selling prices for its Arab Light crude oil for consumers in the U.S., Europe and Asia in April. “Raising the prices does show some faith in stronger demand which could be a bullish view, but we strongly believe that this number from EIA today has not been priced in yet,” said John Macaluso, research analyst at Tyche Capital Advisors. “We see this rally as an opportunity to establish positions selling into the strength.”
Also likely adding to the upbeat market sentiment, Saudi Arabia’s Oil Minister Ali al-Naimi said in a speech in Berlin Wednesday that oil “demand is gradually rising, global economic growth seems more robust and the oil price is stabilizing.”
Crude supply’s rise is largest since 2001
So “for now, the market is going to ignore the storage situation,” said Richard Hastings, macro strategist at Global Hunter Securities. The U.S. Energy Information Administration early Wednesday reported that crude inventories rose by 10.3 million barrels for the week ended Feb. 27. Analysts polled by Platts had forecast a crude-stock climb of 3.7 million barrels, while the API reported a 2.9 million-barrel rise. The EIA’s “substantial build” is the largest since 2001, according to Macaluso.
As the storage hub of Cushing, Okla. “continues to reach closer its operating capacity, it has been said at this rate, operational capacity could be reached as soon as next month,” he said. Gasoline supplies were unchanged from the previous week, while distillate stockpiles fell 1.7 million barrels, according to the EIA. The Platts survey showed that analysts were looking for a decline of 1.7 million for gasoline stockpiles and a fall of 2.2 million barrels for distillates, which include heating oil.