Crude prices logged their biggest daily gains since December, after U.S. data showed that the amount of oil in storage tanks fell for the fifth straight week, easing concerns about a glut that has lingered despite output cuts by the world's major exporters.
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Oil inventories fell 5.2 million barrels last week -- the largest weekly decline this year, according to the U.S. Energy Information Administration. The draw from stockpiles dwarfed the 1.7-million-barrel drop that analysts and traders surveyed by The Wall Street Journal were expecting.
U.S. crude futures rose $1.45, or 3.16%, to settle at $47.33 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose $1.49, or 3.06%, to $50.22 a barrel.
Oil prices have been on an extended slide in recent weeks amid creeping doubts that the Organization of the Petroleum Exporting Countries would be able to work off the overhang of supply that has weighed on prices for nearly three years.
U.S. producers have ramped up output aggressively this year, blunting some of the impact of the OPEC-led production cuts. Stockpiles in the U.S. have started to shrink but still stand near record highs. And rising levels of gasoline in storage tanks in recent weeks have raised the specter of weakening demand.
But Wednesday's figures shook the negative sentiment that has coalesced in recent weeks.
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"There's a huge amount of angst built up in energy markets right now," said Dan Pickering, head of the asset-management arm of Tudor, Pickering, Holt & Co. "There's a bit of a sigh of relief here."
U.S. production rose for the 12th straight week, but imports fell -- something that market participants have been watching closely, awaiting indications that OPEC members are shipping less crude.
And gasoline stockpiles edged lower by 150,000 barrels, breaking a three-week streak of increases. Gasoline futures jumped 5.01 cents, or 3.36%, to $1.5396 a gallon. Diesel futures rose 3.33 cents, or 2.31%, to $1.4754 a gallon.
Even with Wednesday's gains, prices are still down 13% from this year's high, hit in February.
"I think it's a thimbleful of water for a man crossing the desert and the oasis is in sight -- it's a helpful data point, but in of itself it's not enough," Mr. Pickering said.
Analysts said the figures don't take any pressure off OPEC to extend or even deepen its cuts when the group next meets on May 25.
"You still have a really sizable inventory overhang. They're working on it, but they're not going to get it burned off by the end of the summer, " said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis.
Saudi Arabia and Russia have both signaled they would be willing to extend the cuts through the end of the year, or perhaps even longer.
But Tariq Zahir, managing member of Tyche Capital Advisors, said the emergence of any cracks in OPEC's resolve could send crude prices tumbling again. If prices continue to rise to $48 a barrel, he said he would likely take a bearish position in the market.
"There's still more than enough oil out there. What are they going to do about that?" Mr. Zahir asked.
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(END) Dow Jones Newswires
May 10, 2017 16:09 ET (20:09 GMT)