Crude Oil Surges on Drop in Stockpiles

Crude Oil Surges on Drop in Stockpiles

U.S. West Texas Intermediate Crude Oil futures soared on Wednesday after government data showed another decline in U.S. crude stockpiles, its sixth decline in seven weeks. Traders said the reasons behind the draw down in supply were a drop in refinery activity and lower imports.

December WTI Crude Oil futures were trading at $52.13, up $1.51 or +2.98%. Buyers also took out the recent high at $52.16, reaching an intraday high at $52.22. International benchmark Brent Crude Oil rose to $53.05, up $1.37 or +2.70%.

According to the U.S. Energy Information Administration, U.S. commercial crude inventories fell by 5.2 million barrels to a total of 468.7 million barrels in the week-ending October 14. Analysts were looking for a 2.2 million barrel build.

The EIA report showed that the refined products were mixed. Distillate stockpiles fell by 1.2 million barrels versus a 1.6 million-barrel decline. Gasoline stocks rose by 2.5 million-barrels, compared with a forecast of a 1.3 million-barrel drop.

The EIA also reported that U.S. refinery rates dropped to 85 percent during the same time period, the lowest level since April 2013. Commercial imports dropped to 6.9 million barrels per day last week, the lowest volume since June 2015.

In other energy news, trade data showed that production may be declining in China. Additionally, there is growing optimism that OPEC will be able to pass its plan to limit output.

Bullish comments also helped boost oil prices on Wednesday, Saudi Energy Minister Khalid al-Falih said that oil markets were at the end of a considerable downturn as fundamentals were improving and supply and demand were rebalancing.

Russian Energy Minister Alexander Novak also said that he was meeting with the Saudis this weekend to discuss coordination of possible actions.

GOLD

December Comex Gold futures spiked higher on Wednesday as investors took advantage of a weaker U.S. Dollar, a drop in Treasury yields and uncertainty around the timing of a U.S. interest rate hike. Fed Funds traders are now pricing in around a 65 percent probability of the Fed raising interest rates by the end of the year, down from 70 percent before the CPI data was released on Tuesday.

U.S. Economic News

U.S. Housing Starts fell 9 percent last month, but Building Permits jumped 6.3 percent. Mortgage applications also rose 0.6 percent last week with buyers seemingly unfazed by higher mortgage rates.

Later today, the Fed will release the Beige Book at 1800 GMT. Fed speakers include Dallas Fed President Robert Kaplan and New York Fed President William Dudley. The day wraps up with the last presidential debate between Clinton and Trump. Clinton currently holds the lead in several polls.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.