Crude Oil Inventory Sends Prices Climbing

Crude oil is trading at 96.67 gaining 6 cents on Thursday morning after a strong trading day on Wednesday after markets pushed up prices on EIA inventory news. Crude oil futures settled at a one-month high after a report showed U.S. oil stockpiles rose less than expected last week. Oil inventories increased 200,000 barrels to 395.5 million barrels, the Energy Information Administration said. The rise pushed oil inventories to their highest level since the EIA began keeping weekly records in August 1982, though the gain was less than anticipated by experts and offset by a steep rise in fuel demand.

The market got a bit excited that the inventories for crude came in below expectations. Analysts surveyed were calling for an inventory rise of 1.7 million barrels. U.S. oil stockpiles have been rising steadily since the beginning of the year, fueled largely by a steady rise in domestic production. U.S. stockpiles are up roughly 10% year to date. Market participants said they were surprised by last week’s sharp pickup in demand, according to the EIA. The agency’s metric for refined fuel use rose 6.5% to 19.1 million barrels a day, although demand for gasoline–the biggest component–was essentially flat.

On Tuesday, the EIA said Saudi Arabia, the world’s biggest oil producer, boosted production 1.8% last month to 9.2 million barrels a day, the highest level since December. The data also showed overall output from members of the Organization of the Petroleum Exporting Countries rose to a five-month high.

China’s consumer inflation stayed subdued in April while factory-gate price declines deepened, giving the government room to raise utility prices. China’s CPI rose 2.4% in April, compared with a forecast of 2.3%. The producer price index fell 2.6%, after March’s 1.9% drop. On Wednesday, Chinese trade data showed a huge surge in exports increasing China’s demand for crude oil and raw materials. Exports increased by 14.7%, and imports also climbed.

Crude oil prices closed at a 4-week high, supported by a declining dollar against a basket of major currencies, rising global equity markets, and some upbeat trade data out of China.

Natural gas futures were up 1.5%, rebounding from a one-month low, but closed just below the key $4 per mmbtu level. Prices were supported by technical buying and bargain hunting ahead of Thursday’s inventory report despite concerns that moderating spring weather will continue to slow demand. Natural gas inventories are expected to increase by 80-85bn cubic feet, actual data will be released by EIA later in the day. Natural gas is trading at 3.949 continuing its sell off as energy traders more their focus to crude oil.