West Texas Intermediate oil rose after a government report showed U.S. inventories unexpectedly declined last week and as European policy makers weighed bailout options for Cyprus.
Prices advanced as much as 1.1%. The Energy Information Administration, the Energy Department’s statistical arm, said stockpiles fell 1.31 million barrels to 382.7 million in the week ended March 15. Analysts surveyed by Bloomberg forecast a gain of 2 million. Oil climbed before the report as Luxembourg Finance Minister Luc Frieden called for euro-area finance ministers to assemble a new rescue package for Cyprus.
“The inventory draw was unexpected,” said Adam Wise, who helps manage a $6 billion oil and gas bond portfolio as a managing director at Manulife Asset Management in Boston. “I think there’s greater attention being focused on Cyprus than inventories right now, and what occurs there will dictate what prices do.”
WTI futures for April delivery, which expire today, rose 42 cents, or 0.5%, to $92.58 at 10:40 a.m. on the New York Mercantile Exchange. It was at $92.59 before the inventory report. The more actively traded May contract was up 30 cents at $92.82. The volume of all futures was 4.6% below the 100- day average for the time of day, according to data compiled by Bloomberg. The front-month contract lost 1.7% yesterday, the most since Feb. 21.
Brent for May settlement increased 71 cents, or 0.7%, to $108.16 a barrel on the London-based ICE Futures Europe exchange. It closed at $107.45 yesterday, the lowest level since Dec. 10. The volume of all futures was 25% below the 100-day average. Brent’s premium over the same-month WTI contract was $15.34, up from yesterday’s $14.93.
U.S. crude production slipped 9,000 barrels a day from the highest level since 1992 to 7.15 million. Stockpiles at Cushing, Oklahoma, the largest U.S. oil-storage hub and the delivery point for New York-traded futures, shrank by 286,000 barrels to 49 million, the EIA reported.
Cyprus yesterday rejected an unprecedented levy on bank deposits, causing futures to tumble.
“The market is driven by inventories,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Oil is going back and forth on the Cyprus situation.”
While the island country accounts for less than half a% of the euro-region economy, the fight over the bank tax risks triggering new turmoil in the financial crisis that began in 2009 in Greece. The European Union accounted for 16% of the world’s oil demand in 2011, according to BP Plc’s Statistical Review of World Energy.
The euro gained as much as 0.7% to $1.2972. A stronger euro and weaker dollar increase dollar-denominated oil’s appeal as an investment alternative.
Investors were also awaiting a monetary-policy decision from the Federal Reserve. The Fed probably won’t slow the pace of its large-scale asset purchases until at least the fourth quarter, according to median estimates by economists surveyed by Bloomberg before the two-day meeting, which ends today.