MW: Oil rises first day in four as crude inventories drop
Products inventories at 11-year high; refiner utilization rate highest in 11 months
NEW YORK (MarketWatch) -- Crude-oil futures rose Wednesday for the first session in four, climbing above $60 a barrel as government data showed bigger than expected drop in crude inventories last week as refiners used more oil to boost petroleum production.
Refiners ramped up their production to the highest level in nearly a year. Petroleum demand, however, still remained weak, resulting in a big buildup in total inventories of gasoline, diesel, and other petroleum products. Product inventories rose for a 16th week to the highest level in 11 years, an analysis of government data showed.
Also on the bearish side to oil prices, crude inventories at a key delivery point rose for a third straight week to the highest level in nearly four months.
On the New York Mercantile Exchange, August crude futures reduced its earlier gains, rising 88 cents, or 1.5%, to $60.40 a barrel. It was up more than 2% before the data.
"Petroleum numbers today have been following a pattern of a draw in crude oil and a build in gasoline," said Tariq Zahir, managing member at futures trading firm Tyche Capital Advisors. "With demand weak and inventories continue to build, we feel and rally in crude will be short lived."
EIA data
The Energy Information Administration reported Wednesday U.S. crude inventories fell by 2.8 million barrels in the week ended July 10. Gasoline inventories rose 1.5 million barrels, while distillate stockpiles, which include diesel and heating oil, gained 600,000 barrels.
Analysts surveyed by Platts had expected a drop of 2.1 million barrels in crude, a gain of 1.6 million barrels in distillates, and an increase of 750,000 in gasoline.
The drawdown in crude inventories came as refiners ramped up their production. U.S. refineries operated at 87.9% of their operable capacity last week, up from 86.8% a week ago. That's the highest level since August.
But there was not enough demand to absorb rising production, resulting in a big build up in product inventories.
Total petroleum product inventories rose to 771.6 million barrels, up 4.6 million barrels from a week ago. The inventories level now stands at the highest since September, 1998.
Meanwhile, crude inventories at Cushing, Okla., the delivery point for Nymex crude futures, rose 600,000 barrels to 30.8 million barrels, the highest level since the week ended March 27.
Late Tuesday after crude's floor trading closed, the American Petroleum Institute, an industry group, reported crude stocks declined by 1.16 million barrels last week. Motor gasoline stockpiles fell 69,000 barrels, while distillate inventories rose by 656,000 barrels.
The API and the EIA use different methodologies in calculating U.S. petroleum stockpiles.
In other energy trading, August reformulated gasoline rose 3.62 cents, or 2.2%, to $1.6825 a gallon and August heating oil gained 3.66 cents, or 2.4%, to $1.5485 a gallon.
August natural-gas futures fell 9.4 cents, or 2.7%, to $3.336 per million British thermal units.
The EIA will report data on natural-gas supplies on Thursday morning. IHS Global Insight is projecting a storage build of 74 billion cubic feet for the week ended July 10.
The United States Oil Fund (USO 32.91, +0.80, +2.49%) , the biggest exchange-traded fund backed by crude-oil futures, rose 2.5%. The United States Natural Gas Fund added 0.6%.
Weaker dollar
Also helping crude move higher Wednesday, the U.S. dollar fell against most of its major rivals after the Labor Department reported a 0.7% increase in June consumer prices, the biggest monthly advance in nearly a year.
A weaker greenback tends to push up dollar-denominated prices of commodities such as gold and crude.
Also helping sentiment, shares of Intel Corp. (INTC 18.05, +1.22, +7.25%) rose more than 7%, a day after the world's largest semiconductor company reported a second-quarter net loss on a major fine imposed by the European Union. See full story.
In other economic news, the weakness in the nation's factories continued in June, but was not as severe as the prior month, the Federal Reserve reported Wednesday. See Economic Report.
In Nigeria, the fifth biggest oil exporter to the U.S., the main militant group in Niger Delta threatened Wednesday to call off a 60-day truce it declared 12 hours ago over allegations of government troops being deployed near its camps, Agence France-Presse reported.
The Movement for the Emancipation of the Niger Delta, or MEND, has waged an "oil war" against the government, declared the ceasefire earlier on Wednesday after the release of its leader Henry Okah under an amnesty deal.
