Investing.com - Oil has turned into a bull market, from a bear market just two week ago, as priced jumped more than 5%.
U.S. crude's benchmark West Texas Intermediate grade jumped to more than $52 per barrel on Wednesday, gaining exactly $10 per barrel, or almost 24% above the 18-month lows of $42.36 hit on Christmas Eve. U.K. Brent hit 2019 highs above $62.
New York-traded WTI settled up $2.58, or 5.2%, at $52.36 per barrel after a 2019 high at $52.58.
London-tradedBrent was higher by $2.62, or 4.5%, at $61.34 by 3:00 PM ET (20:00 GMT), after rising to $61.69 earlier, the highest so far for this year.
Any asset that gains 20% or more in value from its last low is technically in a bull market.
The rally came as OPEC kingpin Saudi Arabia vowed to “stabilize” the market. Speaking after the kingdom revealed a slight upward revision to its oil reserves following an audit, Saudi Energy Minister Khalid al-Falih said actions taking by the OPEC+ alliance that included Russia were starting to bring the market back after a near-40% drop from 2018 highs.
Falih said the kingdom was pumping about 800,000 barrels less a day from the record high of 10.2 million barrels per day in November. The amount it would ship overseas in February would be another 100,000 bpd less than January's 7.2 million bpd, he said.
But Wednesday's market surge also came after a bearish oil inventory numbers released by the U.S. government.
The U.S. Energy Information Administration saidcrude inventories fell by 1.68 million barrels for the week ended Jan 4. , about a third less than the 2.4 million-barrel draw forecast by analysts.
On the products side, gasoline inventories rose by 8.07 million barrels, more than double the expected build of 3.39 million barrels. They were also 8% above the 5-year average, the EIA said.
Distillate stockpiles, which include diesel and heating oil, increased by 10.61 million barrels, compared to forecasts for a gain of 1.89 million. They were also 5% above the 5-year average.
"The products build is crazy," Tariq Zahir of the oil-focused Tyche Capital Advisors in New York said.
"This rally over the last several days is beyond its last legs in my opinion," added Zahir, who typically has a bearish outlook on crude.
John Kilduff, founding partner at New York energy hedge fund Again Capital, agreed.
"Refiners continue to operate at a high level, but they appear to be playing to an increasingly empty theater, in that,demand and export levels continue to be lackluster, especially for gasoline," Kilduff said.
"Crude oil imports remain on the high side and exports ticked down, again. With demand production holding near 11 million bpd, the overall crude oil supply is keeping up with the high demand from refiners," he added.
The EIA said refiners operated at 96.1% of capacity last week, the first full working week of 2019. In months past, refinery utilization has also come close to 99%. If that happens and demand for products do not pick up, there could be even more inventory buildup.
But Gene McGillian, analyst at Stamford Energy in Connecticut, said oil's 40% slide in the fourth quarter of 2018 was overdone and the sharp correction in the near term was not entirely unexpected.
"There was a lot of fear about excess supplies at the end of last year and the producers have started making good on their pledge to take 1.2 million bpd or more off this year," McGillian said. "Price-wise, we overshot ourselves on the way down and we're now getting back to value."