WTI oil surges to 15-month high as U.S. crude inventories plunge

Rising Production

Crude production rose 1.8% to 7.4 million barrels a day last week, the most since January 1992, the EIA said. Output has surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central part of the country.

Stockpiles at Cushing, Oklahoma, the delivery point for WTI crude dropped 2.69 million barrels to 47 million last week, the report showed. Supplies reached a record 51.9 million barrels in the week ended Jan. 11.

“We’re seeing a reordering at Cushing, which is very supportive to WTI,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “Cushing is no longer a bottleneck as new delivery routes have become available because of investment in pipelines and rail.”

Refineries operated at 92.4% of capacity, up 0.2 percentage point from the prior week and the highest level this year. Utilization rates usually peak during the summer months when U.S. gasoline demand rises. Production of the motor fuel climbed 2.2% to 9.59 million barrels a day, the highest level since August 2010.

“Production keeps climbing but refiners are obviously doing a good job working their way through it,” Schork said.

Fuel Stockpiles

Gasoline stockpiles unexpectedly fell 2.63 million barrels to 221 million. Inventories of distillate fuel, a category that includes heating oil and diesel, advanced 3.04 million to 123.8 million. Supplies of both gasoline and distillate fuel were projected to advance 1 million barrels in the Bloomberg survey.

Consumption of gasoline increased 1.8% to 9.08 million barrels a day averaged over the last four weeks, the highest level since August, the report showed.

Gasoline for August delivery increased 8.89 cents, or 3%, to $3.0149 a gallon on the Nymex, the highest settlement since April 2.

“Everything is going for the market right now,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund that focuses on energy. “Refineries are operating at higher rates, which is increasing demand for crude. At the same time, gasoline demand is up above 9 million barrels a day for the first time in a long while.”

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