US benchmark oil prices surged to a four-month high after stockpiles at the nation’s biggest storage hub fell for the first time since November.
The drop in crude inventories at Cushing, Oklahoma, the main delivery point for West Texas Intermediate contracts, boosted optimism a supply glut will ease in the coming months.
Oil has rebounded from a six-year low in March on speculation a drilling slowdown will curb excess supply. The recovery may be short-lived if higher prices encourage producers to resume drilling too quickly.
“Prices picked up the moment we saw a Cushing draw of about 500,000 barrels,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC in Leawood, Kansas, who helps manage $16.9 billion, said. “US crude oil production appears to have leveled off. We are starting to see the impact of the drop in rig counts.”
WTI for June delivery gained $2.08, or 3.7 percent, to $59.14 a barrel at 1:25 p.m. on the New York Mercantile Exchange. The contract reached $59.33, the highest since Dec. 12. Prices are up more than 20 percent in April, heading for the biggest monthly gain since May 2009.
Brent for June settlement rose $1.82 to $66.46 on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $7.32 to WTI.
Total stockpiles climbed 1.91 million to 490.9 million barrels, rising for a 16th week, according to the EIA. That’s the highest in weekly data from the Energy Department going back to August 1982. Supplies haven’t been this high since 1930, based on monthly records dating back to 1920. Analysts surveyed by Bloomberg had expected a gain of 3.3 million.
“The market is seeing the first drain at Cushing and anticipates much more to come,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “The total crude build is smaller than expected, which is also supportive.”
Crude’s rebound may be short-lived as supplies stay near the highest level since 1930, said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC.
“With overall crude inventories over 490 million barrels, it’s hard to feel that the market rise is sustainable,” Finlon said.
