Crude oil rallies on surprise drop in US stockpiles

An oilfield drilling rig.

Oil prices rose Thursday after government data showed an unexpected decline in U.S. crude stockpiles amid steady production and rising exports.

Light, sweet crude for April delivery advanced $1.09, or 1.8%, to $62.77 a barrel on the New York Mercantile Exchange, closing at a two-week high. Brent, the global benchmark, gained 97 cents, or 1.5%, to $66.39 a barrel.

The U.S. Energy Information Administration on Thursday reported that the amount of crude in storage fell by 1.6 million barrels in the week ended Feb. 16. Analysts surveyed by The Wall Street Journal had expected stockpiles to rise by 1.9 million barrels last week.

Gasoline stockpiles rose by 300,000 barrels, and stocks of distillates declined by 2.4 million barrels. Weekly U.S. production fell by 1,000 barrels from a record high.

"For a little bit of a bullish boost, you've got all the planets lined up here after this report," said Bob Yawger, director of the futures division at Mizuho Securities U.S.A.

Analysts attributed the surprise draw in part to a decline in crude imports. Meanwhile, U.S. exports of crude oil surpassed 2 million barrels a day last week, closing in on a record reached in October.

"Crude oil inventories will not increase as they have done historically, because of our ability to export crude oil from an ever increasing variety of locations on the Gulf Coast," said Andy Lipow, president of Lipow Oil Associates.

Last week, the Louisiana Offshore Oil Port, a major import terminal, announced a test to load crude onto a supertanker in an attempt to send more oil to overseas markets.

Lipow said strong economic growth has also helped boost oil consumption in the U.S. "We're still seeing very good demand for gasoline and diesel fuel," he said.

Many market participants anticipated a build in stockpiles, with refiners running at lower utilization rates and U.S. producers ramping up activity. Oil prices have come under pressure in recent weeks in tandem with a broader market selloff, along with investor anxiety over growing output from U.S. shale.  "We think that stocks could rebound in the coming weeks, which coupled with further growth in U.S. production should pull oil prices down," said Capital Economics analysts in a note.  Gasoline futures rose 0.5% to $1.7657 a gallon, and diesel futures rose 1.1% to $1.9527 a gallon.