By Barani Krishnan
Investing.com - OPEC ought to be mighty pleased with itself.
New York-traded West Texas Intermediate crude finally broke through the $60 per barrel mark for the first time in four months. The catalyst for oil bulls was the Energy Information Administration's announcement of a stunning drawdown of nearly 10 million barrels in U.S. crude inventories last week. Analysts had expected a 300,000-barrel build.
Coming after the previous week's equally surprising crude stockpile drop of nearly 4 million barrels, the latest EIA weekly report was a further confirmation of OPEC's aggressive production cuts this year that have severely crimped crude exports, particularly by Saudi Arabia, to the U.S.
It puts more octane in the tank of long-oil hedge funds and other speculators charging toward their next target -- $70 a barrel for Brent, the U.K.-traded global benchmark for crude.
The May contract for WTI settled up 94 cents, or 1.6%, at $60.23 per barrel, hitting a session high of $60.28. The last time the U.S. crude benchmark traded above $60 was on Nov. 9 at $60.19. That was just before the market tanked on a combination of surging shale crude supply and surprisingly generous sanction waivers on Iranian oil by the Trump administration that forced OPEC into production cuts.
Brent was still more than $1 away from the $70 per barrel mark, trading 79 cents, or 1.2%, higher at $68.40 by 3:08 PM ET (19:08 GMT), after a four-month peak at $68.57.
"The across-the-board inventory declines in crude oil and refined products highlights the tightening mark" of supplies from OPEC cuts and ramping U.S. crude exports, which remained near record highs at 3.4 million barrels last week, said John Kilduff, founding partner of New York energy hedge fund Again Capital.
The EIA report also showed U.S. gasoline inventories fell by 4.59 million barrels, nearly twice the expected draw of 2.41 million barrels. Distillate stockpiles dropped by 4.13 million barrels, compared to forecasts for a decline of 1.09 million.
Gasoline, this year's energy market star with a gain of nearly 45%, traded at above $1.90 per gallon, aiming for the key $2 resistance mark.
To date, crude futures are up more than 30% on the year, with WTI showing a 5% gain for March and Brent 3%.
Ole Hansen, head of commodity strategy at SaxoBank, also cited the Trump administration's ongoing sanctions on Venezuelan oil as one of “formidable opponents to any potential bear out there” in crude.
More than 8 million barrels of last week's crude draws were in the PADD 3 region in the U.S. Gulf of Coast of Mexico, where refineries were starved of heavier Venezuelan and Middle East crude needed for turning out diesel.
Despite Wednesday's rally, some analysts pointed to the protracted U.S.-China trade war and how that could land the world's largest oil consumer with its worst growth in 30 years. For about an hour after the bullish weekly dataset released by the EIA on Wednesday, gains in WTI and Brent remained subdued, on worries about China, before breaking out.
Others fear all may not be well at the 24-member OPEC+ alliance. The Saudi Energy Minister Khalid al-Falih and Russian counterpart Alexander Novak, who head the group, appeared to band together in canceling an April meeting in favor of a more ‘sensible’ decision when the end of the current pact arrives in June. But there were also signs that the cancellation may be to silence any objections to deeper production cuts, especially when some of those countries in the pact could do more with exports at these prices.
"I still think the same thing, which is that there are more sellers than buyers in oil, and the recent run on prices has been generated by WTI spreads strength and gasoline strength, but at the end of the day, investors are still not buying," said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.