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Investing.com – Oil prices rose about 5% on Wednesday, their largest gain in a month, after weekly U.S. government data showed a surprisingly large drop in crude stockpiles ostensibly caused by anemic production from the Permian shale basin that once flooded the market.
New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up $2.97 cents, or 4.9%, at $59.64 per barrel.
London-traded Brent, the global benchmark for crude, settled up $2.91, or 4.6%, at $66.58.
WTI broke from weeks of being boxed in at between $57 and $60 while Brent unshackled itself from a $61 to $63 range after bullish inventory numbers for the week ended April 9 released by the U.S. Energy Information Administration.
The EIA said crude stockpiles dropped 5.899 million barrels last week, compared with analysts’ expectations for a draw of 2.889 million barrels.
Gasoline inventories rose 309,000 barrels last week the EIA said, compared with expectations for a 786,000-barrel build.
Distillate stockpiles, which include diesel and heating oil, dropped 2.083 million barrels in the week against expectations for a build of 971,000 barrels, the EIA data showed.
Gasoline production actually increased last week to 9.6 million bpd on the average, according to the EIA.
Traffic in key U.S. urban areas, including New York, have been hitting peaks over the past week as many of the country’s 50 states pressed on with economic reopenings from the pandemic, helped by a dynamic federal vaccine program.
While that explained the higher consumption of fuels such as gasoline and diesel, the staggering slump in crude stockpiles remained an enigma, given that U.S. crude exports also fell sharply by a net of nearly 6.0 million barrels for the week ended April 9.
That led some to think the only conceivable explanation to be the slide in Permian production, which has been struggling to recover since year’s industry-wide shutdown that took out many of the rigs on the one-time prolific shale oil basin. The Permian is about 250 miles wide and 300 miles long, spanning parts of west Texas and southeastern New Mexico and includes the highly-productive Delaware and Midland sub-basins.
“A year ago, U.S. crude production, as a whole, was a record 13.1 million barrels daily but now, despite an upward adjustment of 100,000 last week, we are barely at above 11 million barrels a day, and that shows the spigots at the Permian aren’t fully open,” said John Kilduff, partner at New York energy hedge Again Capital. “This is despite the number of oil rigs on the ground having almost doubled from the lows of the pandemic. “
The U.S. oil rig count, a measure of future production, stood at 337 last week versus a mid-August low of 172.
