Crude Oil Spikes Higher as EIA Reports Bigger-than-Expected Drawdown

August Crude Oil futures spiked to $49.14 a barrel on Wednesday, following the release of a government report that showed weekly U.S. crude stockpiles fell more than expected. According to the U.S. Energy Information Administration, commercial crude inventories declined by 4.1 million barrels to 526.6 million barrels in the week-ended June 24.

Late Tuesday, the American Petroleum Institute (API) released its weekly report that showed U.S. crude inventories fell by 3.9 million barrels in the week to June 24, far more than the 2.4 million barrels expected by analysts.

Gasoline stockpiles rose by 1.4 million barrels, while distillate fuel inventories decreased by 1.8 million b barrels.

The EIA report also said that U.S. crude oil production fell by 55,000 barrels a day. That follows a decline of 39,000 bpd in the previous week.

Internationally favored Brent Crude also surged to $49.67, up $1.09 or +2.2 percent.

Earlier in the session, oil prices were supported by news of a potential oil workers strike in Norway and a crisis in Venezuela. Both events are affecting the supply side.

A retreating U.S. Dollar helped boost August Comex Gold futures on Wednesday. Lingering concerns over the longer-term financial uncertainty in Europe and the UK also helped underpin prices. At the last reading, U.S. gold was up $9.70, or +0.74% at $1327.60. Spot gold was up 0.88 percent at $1324.00 an ounce.

Gold traders expect more volatility over the near-term and are watching the price action in the equity indices since they have retraced more than half of the Brexit sell-off.

Overall, U.S. stocks were about 1 percent higher on Wednesday, helped by gains in oil prices and increased demand for risky assets. The price action also suggests that investors may feel the Brexit events are a disaster for the UK and Euro, but not necessarily the U.S.

The Dow Jones Industrial Average added more than 150 points. The S&P 500 Index was up 1 percent. Dow transports rallied more than 1.5 percent on the rise in crude oil prices. The NASDAQ composite rose 1 percent, led by biotechnology stocks.

In U.S. economic news, pending home sales fell a more-than-expected 3.7 percent in May from the prior month, of a 0.2 percent year-over-year decline and the first annual drop in two years.

Consumer spending rose 0.4 percent in May as expected. Personal income increased 0.2 percent, on target with the estimate.

The Fed’s preferred inflation measure of personal consumption expenditures (PCE) price ex-food and energy rose 0.2 percent last month, or 1.6 percent over the 12 months through May. The Fed would like to see this figures at 2.0 percent or higher.

Treasury yields backed off their session highs as investors priced in a possible rate cut in September. Federal Reserve governor Jerome Powell also said on Tuesday that Brexit could pose a threat to the U.S. economy.