Oil up by 5%
NEW YORK – Brent crude oil futures surged 5% on Wednesday, after Saudi Arabia’s oil minister said oil demand was growing and data showed Chinese factories were producing more than expected.
Falling refined products inventories reported by the government helped lift U.S. crude and countered data showing a larger-than-expected U.S. crude inventory build.
Brent April crude rose US$2.97 to settle at US$61.63 a barrel. U.S. April crude rose US$1.71 to settle at US$50.99.
“The report is relatively bullish, despite the large crude oil inventory build,” said John Kilduff, partner at Again Capital LLC.
“The draw downs in the refined product categories represent an offset and are supportive,” Kilduff added.
US crude stocks rose 8.4 million barrels last week to a record 434.07 million, the Energy Information Administration (EIA) said on Wednesday, adding 2.4 million barrels at Cushing, Oklahoma, delivery point for the US crude contract.
The relatively small gain at Cushing may have helped widen the spread between Brent and U.S. crude to its widest since January 2014, with Brent’s premium nearing US$11 a barrel.
U.S. gasoline stocks fell by 3.1 million barrels, the EIA said, more than analysts expected, while distillate stocks – including diesel and heating oil – fell by 2.7 million barrels, a smaller dip than expected.
With March contract expirations slated on Friday, U.S. March RBOB gasoline surged 9.85 cents to settle at US$1.7187 a gallon and March ultra-low sulfur diesel rose 7.47 cents to US$2.1036 a gallon.
In early trading, oil got a boost from data showing China’s factory sector expanded this month, according to the flash HSBC/Markit Purchasing Managers’ Index.
As the world’s second largest oil consumer behind the United States, even small changes in Chinese demand can move oil prices.
Oil received a lift from comments by Saudi oil minister Ali al-Naimi, who spoke to reporters in the port city of Jizan, Saudi Arabia.
“Markets are calm now … demand is growing,” said Naimi, who drove a change in the strategy of the Organization of the Petroleum Exporting Countries last year, when it decided not to adjust production despite a sharp fall in oil prices.
“They want to find out where the floor price is. I think they are indicating that we are not that far off the floor in the current price,” said Simon Wardell, oil analyst at Global Insight.