NEW YORK–Oil futures extended their gains Wednesday after government data showed a steep drop in U.S. oil inventories last week, as demand from refineries rose and imports fell.
The Energy Information Administration said crude stockpiles fell 6.3 million barrels last week, well above the 400,000-barrel decline projected by analysts in a Dow Jones Newswires survey.
Light, sweet crude for July delivery recently rose $1.04, or 1.1%, to $94.35 a barrel on the New York Mercantile Exchange following the report. Brent crude on ICE Futures Europe rose 71 cents, or 0.7%, to $103.95 a barrel.
The decline in weekly inventories was the biggest weekly drop all year and placed stockpiles at 391.3 million barrels, just 1.7% above last year’s level. The drop helped pull stockpiles back from the 82-year high reached in the prior week.
The steep drop took many market participants by surprise, and came as refineries ramped up their operations as the summer driving season got under way. Refinery utilization rose 2 percentage points to 88.4% of capacity last week, the EIA reported. Analysts were expecting just a 0.5 percentage-point rise in capacity use.
Oil imports meanwhile fell 7% to 7.268 million barrels a day, the lowest level since September 19, 2008. Imports were 18.9% lower than last year’s levels and the drop comes as rising domestic production outpaces the need for foreign crude.
“I expect refiners to keep drawing down inventories,” said Kyle Cooper, analyst at IAF Advisors. “Crude-oil inventories are still exorbitantly high and it’s a big cost of capital having all that crude just sitting there.”
Gasoline stockpiles last week fell 400,000 barrels, according to the EIA. Inventories of distillates, including heating oil and diesel, rose 2.6 million barrels.
Analysts expected gasoline stocks rose 500,000 barrels, while distillates were seen rising 1 million barrels.
Despite Wednesday’s draw in crude stocks, high U.S. oil inventories have been a buffer against higher oil prices recently, with Nymex crude, the U.S. benchmark, little changed since the start of the year. Brent crude is down 7.1% year to date.
Later this week, oil market watchers are likely to shift their attention to the monthly U.S. nonfarm payrolls report for clues on the health of the job market in the world’s biggest oil consumer. Steadily high unemployment in the U.S. has also kept fuel demand restrained with fewer motorists on the road.
Earlier Wednesday, payroll processor Automatic Data Processing Inc. reported private-sector employers added 135,000 jobs last month. The figure was below expectations for a gain of 170,000 private jobs, while the April employment increase was revised down to 113,000 from 119,000 reported a month ago.
Front-month July reformulated gasoline blendstock, or RBOB, recently traded 2.61 cents, or 0.9%, higher at $2.8443 a gallon. July heating oil rose 2.03 cents, or 0.7%, to $2.8852 a gallon.
